Share based payments

Night_Prowler

Does anyone know what the tax implications are If I received shares in a company in lieu of services provided. Theres no share option scheme, It was just a once off arrangement.

Do I have to Pay income tax?
Does my employer have to pay Prsi?

Any help appreciated,

Thanks

Andrews Tax Consulting

Hi Nigel, the easy answer is that an income tax, PRSI, levy, income levy hit arises by reference to the value of the shares.

The hard part is valuing the shares. If this was part of a salary sacrifice arrangement, i.e. you took shares in lieu of say a €20,000 bonus, then Revenue would treat you as having received a benefit-in-kind (i.e. the shares) of that amount and look for the tax, etc.

If there is no salary sacrifice, i.e. the bonus amount was not agreed, the value for tax purposes is the value of the shares. Here is the rub, if you have taken shares in a private company - and this sounds like the case - and your shareholding is, say, 2%, 5% or 10% of the company they would have very little value. The value would be discounted by up to 75% because of the fact that the company is private and the shareholding is a minority stake with little marketability. As a consequence, the value for tax purpoes may be very very small.

Typically giving shares in a small business is structured using a share clog arrangement. This is a Revenue approved arrangement whereby the value of the shares (Value A) can be discounted (before taking into account the disount for minority stake) by up to 55% (to give Value . The discounted value (Value is further discounted depending on the level of stake by up to 75% (to give Value C).

Example

Taking the above into account if the shares had a value of €20k, the value for tax purposes could be as low as c€2,500 - i.e. a tax liability in the region of €1,300.

From memory the tax liability is due within 30 days of receipt of the shares - but someone else might confirm this point.

Derek

mozattack

I doubt the share clog would work here - there has to be a genuine restriction from selling shares within 5-7 years etc.

Maybe look at the €6,350 share subscription scheme - capped at €6,350 though

MikeSoys

hi,
im looking for advice, i have a CREST account[fxcm]...with some shares...i get a cash dividend...but i would like [for the moment] to see if I can can get shares in lieu rather then a euro/dollar cash amount?...is there anyone here who can advise if i can get shares over cash[in this day and age], is it a CREST thingy? as i'm finding it hard to get info via google...


any info is appreciated