Vol. 542 No. 2
270 Mr. McGrath asked the Minister for Finance the number of applications received from companies in 2001 for approval under the approved share option schemes; the number of such schemes approved to date; and if he will make a statement on the additions to this scheme introduced in the Finance Act, 2001 and their effectiveness. [23638/01]
I assume the Deputy is referring to the tax treatment of approved share option schemes rather than approved profit sharing schemes or save as you earn schemes. The Revenue Commissioners have informed me that they have received 49 applications for approval under the amended tax treatment of share options and one scheme has been approved to date.
An individual is normally chargeable to income tax on the gain between the allocation of a share option and its exercise and to capital gains tax on any gain between the time the option is exercised and the shares sold. Under the new arrangements provided for in Finance Act, 2001, for schemes meeting certain conditions, employees will now be chargeable to capital gains tax on the full gain, that is the difference between the amount paid for the shares and the amount received on disposal of the shares.
To qualify for approval by the Revenue Commissioners, schemes must be open to all employees and full-time directors and must provide that they be eligible to participate in the scheme on similar terms. The scheme may, however, contain a "key employee" element where options can be granted without the similar terms conditions. In such a case, no more than 30% of the total number of shares over which rights are granted under the scheme in any year can be used in the key employee element. Therefore, 70% of the shares must be available for the all employee element of the scheme. Employees cannot participate in both elements in the same year. To qualify for the new tax treatment, there is a requirement that the period between the date of the grant of the option and the date of any subsequent sale of shares must be at least three years.
Subject to certain conditions, tax relief is available where options are exercised on or after 15 February 2001, but before the scheme is approved by the Revenue Commissioners. Such schemes must be approved by Revenue before 31 December 2001 and may qualify provided at the time of both the grant and exercise, if prior to approval, the scheme would have been capable of being approved had the legislation been in force from the time the right was obtained. As with all tax reliefs, I will monitor the operation of this scheme.
