Shares for employees
Approved Profit-Sharing Schemes and Employee Share Ownership Trusts
Note
Revenue approval is required to operate an Approved Profit-Sharing Scheme (APSS) and an Employee Share Ownership Trust (ESOT).
Details of the requirements for approval are set out in in Chapter 10 - Approved Profit Sharing Schemes (APSS) and Chapter 11 - Employee Share Ownership Trusts (ESOT).
APSS
An APSS provides a tax efficient mechanism to give shares to your employees. Revenue approval is required to operate an APSS.
Subject to certain conditions, your employee will be exempt from an Income Tax charge on the share appropriation. Your employee will still be liable to Universal Social Charge (USC) and employee Pay Related Social Insurance (PRSI). You must collect the USC and employee PRSI under the Pay As You Earn (PAYE) system. Employer PRSI does not apply to share-based remuneration.
A trust is required to acquire and hold the shares for the participating employees. The shares must be ordinary shares and held in trust for a minimum of two years. After that time, participating employees can dispose of the shares, but they will be subject to Income Tax.
Shares disposed of after three years are exempt from Income Tax.
Capital Gains Tax (CGT) may also be due where the shares are disposed of.
You can claim a Corporation Tax deduction for your contributions to the trust and the cost of establishing the scheme.
All of your employees who satisfy the qualifying conditions must be eligible to participate on similar terms.
ESOT
An ESOT is a tax-favoured trust mechanism established by a company for placing shares into the hands of employees. Shares can be retained in the trust for up to 20 years for distribution to employees. ESOTs are normally used in tandem with an APSS.
The company establishing the ESOT must not be under the control of another company. Schemes to date have mainly been set up by state and semi-state bodies.
Reporting requirements
The trustees of an approved scheme must file an annual return, even if there is no scheme activitiy for that particular year:
These returns must be filed even if there is no scheme activity for that particular year. Failure to make a timely return can result in withdrawal of approval of the scheme.
For more information please see Share reporting obligations.
Next: Save As You Earn (SAYE) schemes