Employment related shares

Unapproved share schemes

Your employer may reward you by giving you:

  • free shares
  • discounted shares
  • restricted shares
  • forfeitable shares
  • convertible securities
  • Restricted Stock Units (RSUs)
  • Employee Share Purchase Plans (ESPPs)
  • unapproved share options.

Free shares

Your employer may give you free shares under a formal share plan or as a once off award. These shares are a benefit in kind (BIK). The value of the benefit is the market value of the shares at the date of the award.

The shares may be subject to a vesting period. If so the value of the benefit is the market value of the shares at the date of vesting.

You pay Income Tax (IT), Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) through the Pay As You Earn (PAYE) system. 

Discounted shares

Your employer may give you the opportunity to buy shares in the company at a discounted price. The discount is the difference between the:

  • market value of the shares at the date of the award
  • amount you pay for them.

You will pay IT, USC and PRSI on the discount amount. All deductions will be made through the PAYE System.

Restricted shares

Your employer may place a restriction on when you can dispose of your shares. These shares are known as 'restricted shares'.

You may be entitled to a reduction in the amount of IT, USC and PRSI you have to pay. The amount of the reduction will depend on the length of the restriction. You must pay the reduced tax due on the date the shares are awarded. 

You are deemed to have disposed of your shares if you:

  • sell them
  • transfer or pledge them to someone else
  • use them as a guarantee for a loan.

Forfeitable shares

Your employer may award you shares that are subject to forfeiture. For example, if you leave the company or fail to meet expected performance conditions. You must pay IT, USC and PRSI on the market value of any free shares awarded, or on the value of discounted shares. You will be charged tax on the date the shares are awarded even though they may be forfeited. All deductions will be made through the PAYE System.

If the shares are forfeited, any tax charged when they were granted will be reduced to nil. We will repay you any tax you overpaid. You must submit a written claim for repayment to your Revenue Office. You must do this within four years from the end of the tax year in which the shares are forfeited.

Convertible securities

A convertible security is a type of share or stock that can be converted into or exchanged for another type of share or stock. 

Your employer awards you convertible securities. You must pay Income Tax, USC and PRSI on the market value of the securities at the date you received them. The deductions will be made through the PAYE system.

A further Income Tax charge may also arise if and when those securities are converted into or exchanged for other securities.

Restricted Stock Units (RSUs)

A Restricted Stock Unit is a grant (or promise) to you by your employer. The grant is that, on completion of a 'vesting period', you will receive either:

  • a number of shares in the company
  • the cash equivalent of shares.

You must pay IT, USC and PRSI either on the:

  • market value of these shares at the date of vesting
  • cash payment  (if you receive cash equivalent).

Next: Employee Share Purchase Plans (ESPPs)