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ARTICLE · 06 NOVEMBER 2017

"KEEP"ing SMEs On The Path To Success

Mason Hayes & Curran LLP
Mason Hayes & Curran LLP
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Mason Hayes & Curran LLP

Mason Hayes & Curran LLP

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The recent Finance Bill has introduced draft legislation for a welcome new tax incentive scheme to assist small and medium-sized enterprises (SMEs) to attract and retain talent through the use of share options.

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The recent Finance Bill has introduced draft legislation for a welcome new tax incentive scheme to assist small and medium-sized enterprises (SMEs) to attract and retain talent through the use of share options. The new scheme is called the 'Key Employee Engagement Programme' or 'KEEP'. It offers two key benefits for eligible option holders in SMEs when compared to existing share option awards:

  1. a lower tax bill, and
  2. a later tax payment date.

How can KEEP reduce an option holder's tax bill?

Under KEEP, employees are only subject to capital gains tax (CGT) on the sale of the shares. A charge to income tax, universal social charge (USC) and pay related social insurance (PRSI) will not arise on the exercise of the share option. When compared to how gains are currently treated, this means option holders may benefit from a potential tax saving of up to 19% on the discount received when exercising a share option.

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