SME share option scheme – more detail now available following Budget announcement
In Budget 2018, the Minister for Finance announced a new scheme called KEEP (Key Employee Engagement Programme), an incentive to facilitate the use of share-based remuneration by unquoted SMEs to attract and retain key employees. The incentive facilitates SMEs in providing key employees with a financial incentive linked to the success of the company.
This was a significant win for the SFA, as it had been one of our four lobbying priorities ahead of the Budget. Reacting to the announcement, SFA Director, Sven Spollen-Behrens stated: “The introduction of a tailored employee share options scheme (KEEP) for small business is an important initiative, which has the potential to deliver improved management capacity, staff retention and productivity. Currently, only 6% of employees in Ireland are shareholders in the company where they work, compared to the EU average of 22%. Our members are keen to see the detail of the scheme and to start using it to help their businesses to grow and reward their key employees.”
More details are now available through the Finance Bill and other documents issued by the Department of Finance. The SFA is pleased to see that its two main criteria have been included in the scheme: the income tax, USC and PRSI liability has been removed and the scheme can be offered to key employees on a selected basis.
Some more details of the scheme that may be of interest to members:
- Qualifying company must be micro, small or medium (up to 250 employees) and cannot be regarded as a company in difficulty
- Qualifying employees must be full time employees or directors in the company, working at least 30 hours per week
- Gains arising to employees on the exercise of KEEP share options will be liable to Capital Gains Tax (33%) on disposal of the shares, in place of the current liability to income tax, USC and PRSI on exercise
- The incentive is available for qualifying share options granted between 1 January 2018 and 31 December 2023.
A sample scenario provided by the Department of Finance offering a useful demonstration of the KEEP incentive is available on the SFA website.