Share Options Preliminary Tax

Relevant Tax on Share Options and interaction with Preliminary Tax obligations

Revenue have been asked to clarify the extent to which Relevant Tax on Share Options (RTSO) interacts with an individual’s preliminary tax obligations. Tax Briefing, Issue 53, outlined in detail the new scheme of payment of income tax in respect of share options exercised on or after 30 June 2003.

In brief, the position is as follows -

• The RTSO due on the gain arising from the exercise of a share option in a tax year is payable within 30 days of the date of such exercise; and
• Both the gain and the RTSO payable are separate and distinct from preliminary tax and, therefore, is not considered for the purposes of -
  • Determining the amount of preliminary tax payable for the relevant year of assessment
  • The calculation of the margin of error regarding preliminary tax paid in respect of a year of assessment in which the share option is exercised, and
  • Determining whether the 90%, 100% or 105% rule has been satisfied in relation to the payment of preliminary tax.

The RTSO paid may, however, be used to satisfy the individual’s overall income tax liability for the tax year (i.e. it can be credited against the individual’s final income tax liability including the liability relating to the gain on the exercise of the share option).