Finance Act 2002 - Approved Profit Sharing Schemes (APSS’s) and Employee Share Ownership Trusts (ESOT’s)

Section 13 makes a series of changes to the tax legislation governing APSS’s and ESOT’s.

It is provided that the transfer and appropriation of securities other than ordinary shares to the participants in an ESOT/APSS in the circumstances of certain takeovers may take place in a manner, which preserves the tax benefits of the participants. The takeovers are ones to which Section 586 TCA 1997 (amalgamation by exchange of shares) applies and which occur after the ESOT/APSS was established. The circumstances involve companies with no ordinary share capital, or insufficient ordinary share capital available to them. It is provided that the tax benefits may carry through in the event of a subsequent reorganization of share capital under Section 584 TCA 1997 (reorganization or reduction of share capital). In addition, interest income receivable on those securities may be used to reinvest in other such securities.

Provision is also made to set a minimum level of ordinary share capital to be used in the case of a takeover by a company limited by shares. This is intended to confine the provision to those situations where there is a genuine difficulty in doing a share for share swap of ordinary shares.

Section 511A TCA 1997 is restated to ensure that the three year retention period for which shares must be held to benefit from tax relief will be satisfied by a combination of the time shares are held in an ESOT and in an APSS.

A number of technical and other changes are also provided for, such as including ACC Bank and the company, which acquires control of the Irish National Petroleum Corporation Ltd. as relevant companies for the purposes of the legislation. These changes allow the original employees participate in both the original ESOT/APSS and if necessary, in a second APSS, subject to the same overall maximum limit of ₤12,700 per annum that applies to APSS’s generally.