128B Payment of tax under section 128

Summary

This section provides that where an individual exercises a share option on or after 30 June 2003 and before 1 January 2024, any income tax due under section 128 in respect of a gain arising on the acquisition of the shares will be payable within 30 days of the exercise. The income tax payable will be by reference to the higher rate of income tax in force for the tax year in which the option is exercised. Where the taxpayer would only be liable for that year at the standard rate of income tax, he or she can make an application to pay the tax at that rate. The income tax so paid will be credited against the individual’s income tax liability for the year in which the shares were acquired but will not be regarded as a payment of Preliminary Tax for that year.

Details

Application of section

(1) The section applies where a person is chargeable to tax under section 128 on the exercise of an option, on or after 30 June 2003 and before 1 January 2024, of a right to acquire shares (referred to as “relevant shares”) in a company.

Payment of Relevant Tax

(2) Where the section applies, the tax (referred to as “relevant tax”) is to be paid and is to be an amount equal to the gain computed in accordance with section 128(4) charged at the higher rate of income tax in force for the year in which the right is exercised.

Due date for payment of Relevant Tax

(3) This tax must be paid to the Collector-General within 30 days after the exercise of the right to acquire the relevant shares. While the tax is due and payable without the need for an assessment, where the tax or any part of it is not paid by the due date, an assessment for the relevant tax can be made on the taxable person.

Returns

(4) A return, detailing the amount of the gain and the income tax arising on that gain together with any other details that might be required, must accompany each payment of relevant tax.

(5) The return for the relevant tax must be in a form prescribed by the Revenue Commissioners and will include a declaration that the return is correct and complete.

(6) The Collector-General will provide a receipt for the amount of relevant tax paid by the taxable person.

Estimated assessments

(7) An officer of the Revenue Commissioners has the power to raise an estimated assessment in circumstances where he or she considers that a return does not contain full details of relevant tax due. In such circumstances interest will be chargeable on the relevant tax from the original date on which it was due to be paid.

(8) The Revenue officer, in relation to an incorrectly returned item under subsection (4), may make assessments, adjustments or set-offs, so as to arrive at the true liability of relevant tax.

Collection and interest

(9) The provisions of the Income Tax Acts in relation to assessments, appeals, collection and recovery of income tax apply to the assessment, collection and recovery of relevant tax. The standard daily interest rate of 0.0219 per cent per day or part of a day will apply (from 1 January 2023). The rate that applied prior to this was 0.0322 per cent per day or part of a day applied. Interest is payable from the date when the amount becomes due and payable until the actual date of payment.

The provisions of subsections (3) and (4) of section 1080, (which provide that interest on overdue tax be paid gross and not be allowable as a deduction in the tax computation, plus the machinery for recovery of tax charged by assessment) apply in relation to interest payable. Interest will be charged at the daily rate on tax outstanding when an assessment for the relevant tax is raised.

Set-off of relevant tax

(10) The relevant tax paid by a person may be set against any other income tax liability of a person for that year of assessment, and where the relevant tax is in excess of the income tax liability for the year of assessment, the taxable person can claim a refund of the excess.

Preliminary tax

(11) The relevant tax is not to be treated as a payment of, or on account of, preliminary tax for the purposes of chapter 7 of Part 41A.

(12) Relevant tax payable by reason of the exercise of a right to acquire shares is not to be used in connection with the following provisions of the 1997 Act—

• to determine the amount of preliminary tax payable for that year of assessment in accordance with section 959AN(2),
• to determine whether the 90% or 100% rule has been satisfied in relation to payment of preliminary tax, in accordance with section 959AO(3).

(13) Notwithstanding any provision of this section, the normal requirements for a chargeable person to make a return under section 959I continue to apply to gains arising from the exercise of share options in respect of which relevant tax is payable.

Standard rate relieving provision

(14) This is a relieving provision for those individuals who are normally only chargeable at the standard rate. It enables them to make application to, and satisfy, the Revenue Commissioners, that they are likely to be only chargeable at that standard rate. Where the Commissioners are so satisfied, the rate of tax used in the calculation of relevant tax in subsection (2) will be the standard rate of tax in force at that time and not the higher rate.

Relevant Date: Finance Act 2024