There are a number of share incentive arrangements available for companies to offer their employees/executives. These include:
- restricted share schemes: A share clog scheme provides a tax efficient means of rewarding employees by granting shares which are subject to a clog on disposal. This means that the shares will be subject to restrictions prohibiting their sale for a specific period;
- share option schemes: Share options are agreements entitling the holder to buy shares in the future at a fixed price, usually the current value of the shares. The holder can make a profit if the shares increase in value and the option is exercised;
- Save As You Earn (SAYE) schemes: This scheme allows employees to save part of their after tax salary over a three year period at the end of which the employee can use those savings to purchase shares in their employer company; and
- Approved Profit Sharing Schemes (APSSs): Under an APSS the recipient employee is exempt from income tax on the shares received up to an annual limit of €12,700 in a tax year and is also granted favourable income tax treatment on any growth in the value of the shares. However, if the employee sells the shares within three years income tax is charged at 100% of the value of the shares at the date of sale.
These schemes vary in terms of complexity and costs. The following is a brief outline of the main benefits for each of the above schemes.
We have extensive experience in setting up and implementing share schemes. Our services cover the tax, legal reviewing and company secretarial issues involved. If you would like to discuss setting up a scheme or restructuring an existing scheme please don’t hesitate to contact us.