Chapter 4

Approved Share Option Schemes

519D Approved share option schemes.

(1) The provisions of this section shall apply where an individual obtains a right to acquire shares in a body corporate—

(a) by reason of the individual’s office or employment as a director or employee of that or any other body corporate, and

(b) that individual obtains the right in accordance with the provisions of a share option scheme approved under Schedule 12C and in respect of which approval has not been withdrawn.

(2) Tax shall not be chargeable under any provision of the Tax Acts in respect of the receipt of the right referred to in subsection (1).

(3) Subject to subsection (4) (except where paragraph 18(2) of Schedule 12C applies), if the individual exercises the right in accordance with the provisions of the scheme at a time when it is approved—

(a) tax shall not be chargeable under any provision of the Tax Acts in respect of any gain realised by the exercise of the right, and

(b) notwithstanding section 547(1)(a), the individual shall be deemed for the purposes of the Capital Gains Tax Acts to have acquired the shares, acquired by the exercise of the right, for a consideration equal to the amount paid for their acquisition.

(4) Subsection (3) shall not apply in relation to the exercise by any individual of a right in accordance with the provisions of a scheme if the period beginning with his or her obtaining the right and ending with his or her disposal of any of—

(a) the shares acquired by the exercise of the right, or

(b) in a case where section 584, 586 or 587 applies, the shares received in exchange for the shares so acquired,

is less than 3 years.

(5) (a) Where, in exercising a right in accordance with the provisions of the scheme at a time when it is approved, the individual acquires scheme shares from a relevant body, neither a chargeable gain nor an allowable loss shall accrue to the relevant body on the disposal of the scheme shares, and the individual shall, notwithstanding section 547(1)(a), be deemed for the purposes of the Capital Gains Tax Acts to have acquired the scheme shares for a consideration equal to the amount paid for their acquisition.

(b) In this subsection and in subsection (6)—

“relevant body” means a trust or a company which exists for the purpose of acquiring and holding scheme shares;

“scheme shares” has the meaning assigned to it by paragraph 11 of Schedule 12C.

(6) (a) Subject to paragraph (c), this subsection applies to a sum expended by a company in establishing a share option scheme which the Revenue Commissioners approve of in accordance with the provisions of Schedule 12C and under which, subject to subsection (7), no employee or director obtains rights before such approval is given.

(b) A sum to which this subsection applies shall be included—

(i) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or

(ii) if a company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for the purposes of corporation tax.

(c) Notwithstanding paragraph (b) or any other provision of the Tax Acts, any sum expended by a company, either directly or indirectly, to enable a relevant body to acquire scheme shares shall not be included—

(i) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or

(ii) if the company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for the purposes of corporation tax.

(d) In a case where—

(i) paragraph (b) applies, and

(ii) the approval is given after the end of the period of 9 months beginning on the day following the end of the accounting period in which the sum is expended,

then, for the purposes of paragraph (b), the sum shall be treated as expended in the accounting period in which approval is given and not the accounting period mentioned in subparagraph (ii).

(7) (a) Where a share option scheme is approved by the Revenue Commissioners under Schedule 12C and, prior to such approval, an individual had obtained under the scheme a right which meets the conditions of paragraph (b), that right shall be treated for all the purposes of this section and Schedule 12C as if it had been obtained under an approved scheme.

(b) The conditions of this paragraph are—

(i) the right was exercised on or after 15 February 2001,

(ii) the scheme is approved by the Revenue Commissioners under Schedule 12C on or before 31 December 2001, and

(iii) at the time—

(I) the right was obtained, and

(II) the right was exercised, if such exercise occurred before the scheme was approved under Schedule 12C,

the scheme would, at each of those times, have been capable of approval under Schedule 12C if that Schedule had been in force from the time the right was obtained.

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(8) The exemption from income tax authorised by subsection (2) in respect of the receipt of the right referred to in subsection (1) shall not apply where the right is received on or after 24 November 2010.

(9) The exemption from income tax authorised by subsection (3) in respect of any gain realised by the exercise of the right referred to in subsection (1) shall not apply where the gain from the exercise of the right is realised on or after 24 November 2010.

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