Revenue Note for Guidance
This section provides a number of tax reliefs for employee share ownership trusts (ESOTs) which have been approved of by the Revenue Commissioners and in respect of which such approval has not been withdrawn.
The reliefs are —
(1) This section applies to an employee share ownership trust (ESOT) which the Revenue Commissioners have approved as a qualifying employee share ownership trust and in respect of which such approval has not been withdrawn. The Revenue approval is made in accordance with Schedule 12. Schedule 12 contains the rules governing the approval process, the appointment of trustees, the eligibility of beneficiaries and the functions of trustees.
(2) A corporation tax deduction may be claimed by a company in an accounting period for the cost of —
Where such expenditure is incurred by a company carrying on a trade the deduction is given in computing the profits or gains of the trade carried on by that company.
Where such expenditure is incurred by a management or an assurance company, it is added to the company’s management expenses.
(3) If an approved ESOT is established later than 9 months after the end of the accounting period in which the establishment costs are incurred, then such costs are treated as having been incurred in the accounting period in which the ESOT is established and not in the accounting period in which the establishment costs are actually incurred.
(4) A company controls another company if the company can —
(5)(a) Qualifying purposes in relation to expenditure of contributions by trustees of an ESOT are —
(5)(b) The expenditure period in relation to expenditure of contributions by trustees of an ESOT on qualifying activities is the 9 months period starting from the end of the accounting period in which the sum is expended or such longer period as agreed by the Revenue Commissioners.
(6) For the purposes of this section, the trustee of an ESOT are treated as applying the sums, paid to them by the company, on a first-in-first-out basis, irrespective of the number of companies making the payments.
(7) The trustees of an approved ESOT are exempt from income tax on dividends received in respect of securities held in the trust if and to the extent that the income is spent by the trustees in an expenditure period on one or more qualifying purposes. (Both the “expenditure period” and “qualifying purposes” are defined in paragraph 13 of Schedule 12).
(7A) The trustees of an ESOT are exempt from capital gains tax on any gains arising from the sale of securities on the open market or the redemption of securities if and to the extent that such proceeds are used—
(8) A chargeable gain does not arise on the transfer of securities by the trustees of an approved ESOT to the trustees of an APSS.
(8A) No chargeable gain shall accrue to the trustees of an approved ESOT on the transfer of any securities to the personal representatives of a deceased beneficiary.
(8B) The receipt of any sum of money or securities by the personal representatives of a deceased beneficiary from the trustees of an approved ESOT shall be exempt from income tax.
(9) Where the Revenue Commissioners withdraw approval of an ESOT, the reliefs provided by the section cease to apply in relation to that ESOT from the effective date of the withdrawal.
(10) For the purposes of section 519, a “deceased beneficiary” means a person who at the time of his/her death was—
Relevant Date: Finance Act 2019