Employee Share Purchase scheme

I am fortunate that my company has just launched their Employee Share purchase plans in Ireland. this provides for an option of buy one share, get one free (hold for a year) or buy qrtly at a 15% discount immediate release.

Is there any stickies on taxation related to such schemes or any general advice?

thanks.

Search for "ESPP" and "ESOP" maybe?
Employee Stock Purchase/Option Schemes.

Both options sound a bit unusual, to me at least.

There are variations but a common US ESPP is to buy every 6 months, at a 15% discount and at the lower of either the start price or end price.

Here it's quarterly and that option element of buying at the lower price may not exist? If it's purely a 15% discount, that sounds more like a BIK to me. The option of buying at the lower price is why the usual ESPP falls under RTSO (Relevant Tax on Share Option).

The buy one get one free isn't one I've heard of, it should be more valuable but
- I'd make sure there's an option to sell the shares you bought before 12 months if you need the cash or you don't like the outlook for the company.
- also you'd need to be confident Revenue are happy it's a share option, i.e. Revenue don't expect 52% of the free shares when granted as opposed to when exercised.

thank

ashambles said:

Both options sound a bit unusual, to me at least.

There are variations but a common US ESPP is to buy every 6 months, at a 15% discount and at the lower of either the start price or end price.

Here it's quarterly and that option element of buying at the lower price may not exist? If it's purely a 15% discount, that sounds more like a BIK to me. The option of buying at the lower price is why the usual ESPP falls under RTSO (Relevant Tax on Share Option).

The buy one get one free isn't one I've heard of, it should be more valuable but
- I'd make sure there's an option to sell the shares you bought before 12 months if you need the cash or you don't like the outlook for the company.
- also you'd need to be confident Revenue are happy it's a share option, i.e. Revenue don't expect 52% of the free shares when granted as opposed to when exercised.

Click to expand...

Thanks, on the BOGOF option, its more lucrative if the share price increases obviously, however you have to hold for minimum of 12months. I assume the Revenue treat it as an income so i'm taxed at 52% on it and then as CGT when exercised. this is how previous RSUs were treated.
These aren't options, they are Share Purchases. This is the non-qualified ESPP, the qualified ESPP is the 6month purchase at 15% discount.
not sure how revenue deal with the 15% discount option?

Talk to your HR or the agency managing this for your company. They should be able to answer all your questions. That's their job.

HR tend to be unhelpful these days. But if your company is already paying an accountancy firm to move the program to the Irish office, maybe they could be persuaded to give a presentation on the taxation.


On the 15% discount - it'll be maximum tax usually 52%. If the scheme is a simple discount then Revenue say
"Your employer will make the necessary deductions through payroll and pay the tax directly to the Collector-General."

They also say,
"Some ESPPs might be drafted in such a manner that would make them share option plans. This will depend on each individual plan."

See example 1 versus example 2 on the linked page for how Revenue treat both types of ESPP. If it's the simple discount type it sounds like your company should be saying they'll do the tax for you via payroll.

The BOGOF I've never seen so can only speculate, the safest practice is to assume Revenue will default to taxing it as harshly as possible. So I'd agree with your guess that you'll pay 52% when you get the free shares, and then it'll be CGT if there's any further profit. I'd be unhappy to pay 52% on shares I can't sell for a year and worse if ties up an equal amount of shares I've bought. However possibly Revenue could see it as a type of option where you have the option of picking up the extra shares if you wait a year which would improve the tax treatment - maybe it's a common scheme in some sectors.

Is the BOGOF a one off purchase per year or monthly purchase? Monthly would be better.

Thank you for the detailed reply, much appreciated.
The BOGOF version is 4 times a year, it is very attractive if the company share price grows. It is limited to 25% of income……and as I mentioned, cannot be exercised for 12 months. I plan to maximise it as it’s lucrative even if I pay the 52% upfront.
With previous RSUs that vested over 4 years, I was taxed upfront at 52%, which was achieved by automatic sale of 52% of the shares upfront on award date.
I guess I need to inform revenue when I sell as I would have to pay CGT on the difference. What’s the chance of them knowing? The shares are held in a US e-trade account who also have my PPS no. So I guess there is some back channel to revenue?