519A Approved savings-related share option schemes

Summary

This section provides an individual with an exemption from income tax on the receipt of the granting of the right and the exercise of the right to obtain shares in his or her employing company under an approved savings-related share option scheme. The shares must be paid for out of proceeds of a certified contractual savings scheme.

Details

Application

(1) The section applies where an individual, being an employee or director by reason of his office or employment in a company, obtains a right to acquire shares in that company or another company and the right is obtained in accordance with the provisions of a savings-related share option scheme approved by the Revenue Commissioners on or after the 6 April, 1999 under Schedule 12A and in respect of which approval has not been withdrawn.

(2) No tax will be charged on receipt of the right referred to in subsection (1).

(3) Subject to exceptions outlined in subsection (4), income tax that would otherwise be due under the Tax Acts will not be chargeable on any gain realised by exercising the right.

(3A) Where a “relevant body” is used to acquire scheme shares which will ultimately be passed on to the employee the following provisions apply:

1. when shares are disposed of to an individual who is a member of the share scheme by a “relevant body”, no chargeable gain or allowable loss shall accrue to the “relevant body” (the trust or subsidiary company established to acquire the shares) in respect of that disposal, and the individual will be regarded as having acquired the shares at the price paid, and
2. for this purpose and section 519B —
   • “relevant body” means a trust or company which exists to acquire and hold scheme shares.
   • “scheme shares” has the same meaning as in paragraph 10 of Schedule 12A.

The effect of these provisions is that the employee is in exactly the same tax position as would arise if the company operating the scheme transferred newly issued shares directly to the employee without using a “relevant body” as an intermediary.

(4) The tax relief outlined in subsection (3) does not apply where the right being exercised is exercised within 3 years of the right being granted and has become exercisable for one of the following reasons:

• a person gaining control of the company (a take over) following a general offer to acquire the whole of one or more classes of the company’s shares,
• the amalgamation or reconstruction of the company under a scheme sanctioned by the court under section 201 of the Companies Act, 1963,
• a person becoming bound or entitled to acquire shares in the company under section 204 of the Companies Act, 1963,
• a resolution being passed for the winding up of the company,
• the sale out of the group of the company for which the option holder worked, or
• the sale out of the group of the business or part of a business in which the option holder worked.

(5) The term “savings-related share option scheme” takes its meaning from Schedule 12A.

Relevant Date: Finance Act 2019