Approved Profit Sharing Schemes

As a result of enquires in relation to the Salary Forgone and Contributory elements of approved Profit Sharing Schemes for the ‘year’ of assessment 6 April to 31 December 2001 (the short tax year) Revenue are prepared to agree the following transitional arrangements for the short tax ‘year’ only.

Approved Profit Sharing Schemes and Salary Forgone

• Salary collected from participants in schemes during the year of assessment 6 April 2001 to 31 December 2001 may be carried forward into the year of assessment 2002. Any amount carried forward will not be regarded as income arising in the short tax year for any purpose.
• The carried forward amount must be matched by a company contribution in the normal way, both elements to be used to acquire shares in the year of assessment 2002. Where this cannot be done and a refund to the participant is necessary, the refunded amount will be regarded as income arising in the year of assessment 2002. Because the year of assessment 2002 is a full 12 month period, the normal appropriation limit of €12,700 will apply.
• For the year of assessment 2002 and all future years of assessment any amounts collected by way of salary forgone must be matched in the normal way by company contributions within that year of assessment.

Approved Profit Sharing Schemes and Contributory element

• Monies saved from net salary during the year of assessment 6 April 2001 to 31 December 2001 may be carried forward into the year of assessment 2002 and be matched by a company contribution in the normal way, both elements to be used to acquire shares in the year of assessment 2002.
• The normal limit of €12,700 for the company contribution and salary forgone and other rules governing contributory schemes will continue to apply.
• Any net salary saved in 2002 must be used in 2002 subject to all the normal rules.
• Net salary saved in 2003 can only be used to match free shares in 2003. This will continue for subsequent years of assessment.

These arrangements should be regarded as exceptional, in recognition of the unique circumstances of the short tax year. The Revenue Commissioners will not agree to these arrangements in respect of any future years of assessment and reserve the right to withdraw them in the event that they are being abused.