Léim ar aghaidh chuig an bpríomhábhar
Gnáthamharc

Dáil Éireann díospóireacht -
Wednesday, 30 Jan 2002

Vol. 547 No. 1

Written Answers. - Share Option Schemes.

Jim O'Keeffe

Ceist:

415 Mr. J. O'Keeffe asked the Minister for Finance the number of company share option schemes which have been sought and approved under the Finance Act, 2001; his views on whether the terms of the legislation are too restrictive; and if he will amend the legislation to encourage greater participation. [1803/02]

As the Deputy may know, under income tax law, the gain arising from shares acquired as a result of employee share options is chargeable partly to income tax, on the difference between the price paid for the shares and the market value at date of exercise of the option, and partly to capital gains tax, on the difference between the market value at the date of exercise and the proceeds received on any subsequent sale of the shares.

The case has been made to me that the gain from such shares was more in the nature of a capital receipt than income and should, therefore, be chargeable to capital gains tax only. This treatment, it is argued, would help companies recruit and reward highly skilled and internationally mobile staff as well as facilitating participation by all employees in the fortunes of the company for which they work. Accordingly, in the Finance Act, 2001, after extensive consultation with interested parties, I introduced a scheme providing for favourable tax treatment where, on disposal, the gain from shares acquired as a result of employee share options would be chargeable to capital gains tax only, providing certain conditions were satisfied.

To receive approval from the Revenue Commissioners for such favourable tax treatment, a share option scheme must be open to all employees and must provide that employees be eligible to participate on similar terms. However, the scheme may contain a key employee element where options can be granted without similar terms or conditions. In such a case, no more than 30% of the total number of shares over which rights are granted in any year can be used for the key employee element. Employees cannot participate in both elements of the scheme in the same year. There is also a minimum retention period of three years between the time the option is granted and the time the shares may be sold by the employee. It was understood at the time from the relevant agencies and representative bodies that a relief along these lines would meet their objectives.

It should also be noted that these "all employee-similar terms" rules are a feature of the other tax relieved employee share schemes; approved profit sharing schemes, employee share ownership plans and save as you earn schemes. I understand from the Revenue Commissioners that, to date, seven employee share option schemes out of 71 applications have been approved for the purpose of the relief and it is estimated that 6,000 individuals within these schemes could benefit. As I mentioned previously, I will continue to monitor this relief to ascertain that it is fulfilling the aims for which it was introduced.
Barr
Roinn