Vol. 536 No. 4
61 Mr. Higgins (Dublin West) asked the Minister for Finance if he will make a statement on the concerns expressed by the Irish Congress of Trade Unions regarding his proposal which would enable retrospective tax relief for persons holding unexercised share options. [10005/01]
I am aware of the concerns expressed by the Irish Congress of Trade Unions about the changes I made to the new provisions relating to the tax treatment of share options. I understand that these concerns related to the amendment made on Committee Stage of the Finance Act, 2001 which allows the amended tax treatment to apply to share options exercised on or after 15 February 2001, rather than granted on or after that date as provided for in the Finance Bill as published.
I should point out that, under the normal treatment of share options, the charge to income tax arises when the option is exercised, that is, when the shares are purchased. Under provisions I made in the Finance Act, 2000, the tax charge may be deferred for a period of seven years or until the shares are actually sold, whichever is the earlier. The income tax applies to the difference between the price paid and the market value of the share on the date of purchase. Any subsequent gains in the value of the shares would be subject to capital gains tax when the shares are sold.
There is no question of retrospective tax relief under the new provisions as the particular tax treatment will only arise where options are exercised after 15 February 2001, the date of publication of the Bill. If the options are exercised before the scheme is approved by the Revenue Commissioners, they will qualify for the new relief provided the scheme is approved before 31 December 2001 and that at the time of both the grant and the exercise – if that is prior to approval – the scheme would have been capable of being approved had the legislation been in force at that time.
