Revenue Note for Guidance
This Schedule sets out the conditions which must be complied with if a savings-related share option scheme is to be approved by the Revenue Commissioners. The conditions govern the type of company, eligibility, type of shares, exercise of rights, acquisition of shares and the share price.
par 1 The question of whether one company is controlled by another is to be determined in accordance with section 432.
A company is a member of a consortium owning another company if it is one of not more than 5 companies which between them beneficially own not less than 75 per cent of the other company’s ordinary share capital and each of them beneficially owns not less than 5 per cent of that capital.
The paragraph also provides meanings of “approved”, “associated company”, “bonus date”, “control”, “full-time director”, “grantor”, “group scheme”, “market value”, “savings-related share option scheme”, “scheme shares”, “shares” and “specified age” for the purposes of the Schedule.
par 2(1) & (2) A company which has established a savings-related share option scheme may apply to the Revenue Commissioners for approval of the scheme. The application must be made in writing and must contain such particulars and be supported by such evidence as the Revenue Commissioners may require. The Revenue Commissioners shall approve the scheme if they are satisfied that it meets the requirements of the Schedule.
par 2(3) A company which controls one or more companies may set up a scheme which extends to some or all of those companies. A scheme of this kind is called “a group scheme”.
par 2(4) A “participating company” in a group scheme is the company which has established the scheme or a company over which that company has control and to which the scheme is expressed to extend.
par 2(5) The scheme is required to indicate what is the “specified age” (between 60 and pensionable age) for the purposes of the scheme.
par 3(1) The Revenue Commissioners are constrained from approving a scheme which contains features which are neither essential nor reasonably incidental to the purpose of providing for employees benefits in the nature of rights to acquire shares.
par 3(2) The Revenue Commissioners must be satisfied that there are no features of the scheme (other than what is already permitted by the legislation) which have or would have the effect of discouraging any eligible employee from actually participating in the scheme and, where the company seeking approval is a member of a group of companies, that approval of such company would not result in benefits being conferred wholly or mainly on the higher or highest paid directors and employees in the group of companies.
par 3(3) “group of companies” is defined for the purposes of subparagraph (2) as a company or any company over which it has control, or with which it is associated. A company is treated as associated with another company where it could be reasonably be considered that—
par 4(1) The Revenue Commissioners may withdraw their approval of a savings-related share option scheme where any of the requirements of the Schedule cease to be complied with or the grantor fails to provide information as requested under paragraph 6. The tax relief applicable by virtue of section 519A(3) shall continue to apply as if the scheme were still approved to rights obtained before the withdrawal of approval which are exercised after withdrawal of approval.
par 4(2) An unapproved alteration of an approved scheme will invalidate the approval with effect from the date of the alteration.
par 5 Where the Revenue Commissioners refuse to approve a scheme, refuse to approve an alteration in a scheme, withdraw approval of a scheme or refuse to decide that a condition subject to which approval was given is satisfied, the company has a right to appeal the decision in relation to the scheme to the Appeal Commissioners. The appeal must be made within 30 days after the date of the notice of the decision in relation to the scheme. The appeal is heard and determined in the manner provided for in Part 40A of the Tax Acts.
par 6 The Revenue Commissioners may by notice in writing require a person to furnish them, within not less than 30 days, such information as they consider necessary to enable them to determine whether to approve or to withdraw approval of a scheme, to determine a participant’s liability to tax under a scheme or to enable them to administer the scheme and any alteration of the terms of a scheme.
par 6A With effect from 2009 onwards, the trustees of an approved scheme are obliged to automatically furnish the same information to the Revenue Commissioners in respect of each calendar year. This return of information is required by 31 March in the year following the year in question. Failure to do so will result in penalties as set out in sections 1052 and 1054, as appropriate.
par 7 The Revenue Commissioners may nominate any of their officers to perform acts and discharge functions authorised by the Schedule, on their behalf.
par 8(1) A person is not eligible to participate in a scheme, that is to obtain and exercise rights under it, if that person has, or at any time within the preceding 12 months had, a material interest in a close company which is either the company whose shares may be acquired under the scheme or a company having control of that company or is a member of a consortium which owns that company.
par 8(2) The term “close company” includes any company which would be a close company but for the fact that it is not such a company because —
par 8(3) A “close company” has the meaning assigned to it by section 430.
A person has a material interest in a company if he/she owns more than 15 per cent of the ordinary share capital of the company. Similarly, in applying the definition of “associate” in section 433 to the determination of whether a person has a material interest in a company —
par 9(1) Participation in the scheme, subject to the material interest test in paragraph 8, must be open to every person, that is, to obtain and exercise rights under it, on similar terms who —
par 9(2) “Similar terms” may include terms which vary in relation to participants according to their level of remuneration, length of service or similar factors.
par 9(3) Except where provided by paragraph 20 or pursuant to a provision referred to in paragraph 22(1)(e) or (f), a person shall not be eligible to participate unless he/she is an employee or director of the company establishing the scheme or, in the case of a group scheme, of a participating company.
par 10 The shares which can be acquired under an approved savings-related share option scheme must satisfy the requirements of paragraphs 11 to 15.
par 11 The shares must form part of the ordinary share capital of —
par 12 The shares must be —
par 13 The shares must be fully paid up, not redeemable and not subject to any restrictions other than those attaching to all shares of the same class or an authorised restriction (in connection with cessation of employment).
A restriction on shares imposed by a company’s articles of association which —
is an authorised restriction provided the disposal is by way of sale for money on terms specified in the articles of association, and the articles also contain general provisions whereby any person disposing of shares of the same class (whether or not held or acquired in the manner outlined at (i) and (ii) above) may be required to dispose of them by way of sale for money on terms specified in the articles of association.
par 14(1) & (2) In determining whether scheme shares are subject to any restrictions, any contract, agreement, arrangement or condition restricting the freedom of a participator in a scheme to dispose of the shares or an interest in them, or to dispose of the proceeds of their sale, or to exercise any right conferred by the shares, or resulting in any disadvantage to him/her or to a connected person, following sale or exercise is regarded as such a restriction. Any contract, agreement, arrangement or condition with provisions similar in purpose and effect to those provisions of the Model Code set out in the Listing Rules of the Irish Stock Exchange are not included.
par 15 If a company, whose shares are being used in a scheme, has more than one class of issued ordinary share capital, the majority of the issued shares of the class used in the scheme must be held by —
par 16(1) A scheme may contain provisions to permit an option holder to exchange options in the following circumstances where the acquiring company —
In such circumstances, a participant in a scheme may within an “appropriate period” release “old rights for “new rights” in the acquiring company or a company falling within paragraph 11(b) or 11(c).
par 16(2) The “appropriate period” is —
par 16(3) The shares for which the new rights are granted must satisfy the requirements of paragraphs 11 to 15 and must be exercisable in the same manner as the old rights. The value and aggregate subscription price of the new rights on acquisition must be exactly the same as the value and aggregate subscription price of the old rights on disposal.
par 16(4) For the purposes of section 519A and this Schedule and for the purposes of the continued application of the provisions of the scheme the new rights shall be regarded as granted at the time of the old rights.
par 17 The scheme must provide for the shares to be paid for only with the repayments (i.e. contributions and bonus) payable and any interest under the certified contractual savings scheme as defined in section 519C(4).
par 18 Other than in the circumstances outlined in paragraphs 19 to 22, rights must not be capable of being exercised before the bonus date which is the date on which the repayments are due to be paid. For the purposes of paragraph 17 and paragraph 18, at the time when the rights are obtained, the individual must decide whether repayments to be used to buy the shares are to include the bonus or not and where repayments are to include the bonus whether it is to be the maximum bonus payable on the earliest date the maximum bonus is payable or in relation to any other bonus the earliest date that that bonus is payable.
par 19 If a person holding rights to acquire shares dies before the bonus date, the scheme must provide for those rights to be exercised within twelve months of the date of death. If the death occurs within six months after the bonus date, the scheme must provide for the rights to be exercised within twelve months of the bonus date.
par 20 If a person having obtained rights to acquire shares ceases to hold the eligible office or employment for the following reasons —
the scheme must provide for those rights to be exercised within six months of cessation.
If such a person ceases for any reason other than the above reasons —
par 21 If a person continues to work after reaching the specified age the scheme must provide that that person may exercise the rights within 6 months of reaching that age.
par 22(1) The scheme may also provide for the following —
par 22(2) For the purposes of paragraph 22 a person shall be deemed to have obtained control of a company if he/she and others acting in concert have together obtained control of it.
par 23 The rights obtained under a scheme must not be transferable or be capable of being exercised later than 6 months after the bonus date except where, under paragraph 19, a person’s rights may pass to a person’s estate and be exercised within one year of death or if death occurs within 6 months after the bonus date, be exercised within 12 months of the bonus date.
par 24 For the purposes of paragraph 20 or 22(1)(e) no person shall be treated as ceasing to hold an office or employment until that person ceases to hold an office or employment in the company which established the scheme or in any company controlled by that company or in any associated company.
par 25(1) Contributions made by a participant under a certified contractual savings scheme must be sufficient to secure, as nearly as possible, the repayment of an amount equal to the sum required to pay for as many shares as the option gives the person the right to acquire, repayment being determined by reference to paragraph 18.
par 25(2) The total contributions by a participant, at minimum, cannot be more than €12 per month and, at maximum, cannot exceed €500 per month.
par 26 The price at which shares may be acquired on the exercise of rights must be stated at the time those rights are obtained and must be not less than 75 per cent of the market value of the shares of the same class at that time or at an earlier time or times agreed in writing between the Revenue Commissioners and the company which has established the scheme. The scheme may provide for such variation of the subscription price as may be necessary to take account of any variation in the share capital of which the scheme shares form part.
par 27(1) For the purposes of the material interest test in section 437(2) as applied by paragraph 8(3)(b)(ii) of this Schedule a right to acquire shares shall be taken as the right to control the shares.
par 27(2) The shares which are attributable to an individual by the application of paragraph 27(3) of this Schedule are to be taken into account for the material interest test in determining whether an individual’s right to acquire shares exceeds a particular percentage of the company’s ordinary share capital.
par 27(3) If shares attributed to an individual consist of or include shares over which that individual has a right to acquire and the circumstances are such that if the right was exercised the shares acquired would be new shares which the company has to issue in the event of exercise of the right, then, for the purposes of determining, prior to the exercise of that right, whether the shares attributed to the individual exceed a particular percentage of the ordinary share capital, such ordinary share capital is to be increased by the number of new shares referred to above.
Relevant Date: Finance Act 2021