In his budget speech on 10 October 2017, the Minister for Finance Paschal Donohoe announced that a new tax incentive is being introduced to facilitate the use of share-based remuneration by unquoted small and medium enterprise (SME) companies to attract key employees. Gains arising to employees on the exercise of share options granted in accordance with the rules of the new "Key Employee Engagement Programme" (KEEP options) will be liable to capital gains tax on disposal of the shares, in place of the current liability to income tax, USC and PRSI on the exercise of share options. This incentive will be available for qualifying share options granted between 1 January 2018 and 31 December 2023.
This news will be welcomed by the SME sector but the devil will be in the detail of the Finance Bill, which is due to be published on 19 October 2017. In particular, we await further details on the conditions that will enable companies to treat their share options as qualifying KEEP options, and also whether - and at what level - a cap may apply to this favourable tax treatment.
If you have any queries about this development, or any other share incentive queries, please contact Keavy Ryan or Rosaleen Boyle, or your usual A&L Goodbody contact.