Company Share Scheme PRSI/USC??

simo28

Hey folks,

I'm trying to understand something but can't get an answer in my job as the FD is off. We have a company share scheme going in work and it is due to mature in the third quarter of next year. Seems to be going ok and I'll make some profit from it (at this point) but what I don't get is why we have to pay PRSI and USC on it. Is it because it is income and will be payable to me via payroll once it matures? I know I've to pay CGT and that's fine but to get hit with more tax seems just plain mad to me. If it was payable outside of payroll (not sure if this is an option for this) would I only be liable for the CGT?

jon1981

Is it an employee share purchase program (ESPP)? If so, it's not CGT, it's income tax you pay on the 15% discount and gain (if theres any). Theres no avoiding it. Frustrating i know but that's life!

If it's restricted stock units (RSUs) that were granted to you, then you pay income tax at the vest date and CGT on profits if you choose to hold and sell at a later date.

There's no way of circumventing paying of income tax in either case above.

omerin

That's not my understanding on ESPP, the amount you wish to invest is not taxed at source, shares are purchased at the lower amount - either at the start or end of the program minus 15%. The tax (income tax, prsi and USC) you pay is based on the amount you invested, not on the 15% discount. You then pay CGT on the profit, reduced by your annual allowance. Open to correction

tk123

simo28 wrote: »

I know I've to pay CGT and that's fine but to get hit with more tax seems just plain mad to me. If it was payable outside of payroll (not sure if this is an option for this) would I only be liable for the CGT?

It's extra income so yes you have to pay income tax and GCT regardless of how you're paid. Payroll don't pay ours btw - if your payroll in work are taking care of the income tax side of it for you count yourself lucky because if not you'll be classed as self assessed and have to fill from 11 every year until you deregister!

jon1981

Agreed, my payroll only pay the income tax on the RSU at source, for the ESPP i have to pay the income tax myself and declare it on a form 11 the following year along with CGT if applicable.


Ultimately theres no way of avoiding the income tax OP.

simo28

Firstly, thanks for the replies.
Correct me if I'm wrong here, so I'm paying income tax on the amount I invest as this is taken from my monthly wage before PAYE, PRSI and USC is applied and therefore its a part of my income that hasn't been taxed. Then I pay the CGT on whatever profit I make on the shares.
I hope I have this right as it makes sense to me now.
So what are tax rates. Income tax is ????? CGT is ?????

jon1981

Sorry but thats normal taxation. You still have to pay income tax in the profits you will make once those shares vest to you.

Can you find out if the scheme is an ESPP scheme. If so, you pay 52% on the profits and you complete an Rtso1 form inside one month of vest. If you hold the shares you then have to pay CGT on any gains you make from the vest date forward when ever you do sell. Assuming you plan to sell straight away then its just 52% on the profit.

Im also assuming youre on the higher tax band, hence the 52% figure.

simo28

Just to be clear, I don't mind paying the taxes. I mean, obviously its a pain but I'm not looking to avoid it. This is just to get clarity.
I'm not on the higher tax band, quite a way off that level tbh. It's been tough to be without the amount of my monthly investment but I figured at the start it would be a better way of saving with the bank.

jon1981

simo28 wrote: »

Just to be clear, I don't mind paying the taxes. I mean, obviously its a pain but I'm not looking to avoid it. This is just to get clarity.
I'm not on the higher tax band, quite a way off that level tbh. It's been tough to be without the amount of my monthly investment but I figured at the start it would be a better way of saving with the bank.

You're right it's great way to save. I could be off on my advice so maybe check with your payroll people.

cooperguy

simo28 wrote: »

Firstly, thanks for the replies.
Correct me if I'm wrong here, so I'm paying income tax on the amount I invest as this is taken from my monthly wage before PAYE, PRSI and USC is applied and therefore its a part of my income that hasn't been taxed. Then I pay the CGT on whatever profit I make on the shares.
I hope I have this right as it makes sense to me now.
So what are tax rates. Income tax is ????? CGT is ?????

So my understanding is different. The money is taken from your wages AFTER you have paid tax on it. You get a 15% discount on the price of the share as part of the ESPP scheme. This 15% discount is also taxed as income.

When you sell the shares you pay CGT on the gain from the undiscounted share price you bought at

homer911

It's quite straightforward - You pay PAYE/USC/PRSI on the shares when they are purchased on your behalf. You have to self declare this payment within the month the shares are purchased. You also have to declare on a Form 11.
When you sell the shares, you may be subject to CGT, depending on the level of profit made (taking into account your annual allowance of €1000 tax free gains). You can offset other losses against this.

simo28

homer911 wrote: »

It's quite straightforward - You pay PAYE/USC/PRSI on the shares when they are purchased on your behalf. You have to self declare this payment within the month the shares are purchased. You also have to declare on a Form 11.
When you sell the shares, you may be subject to CGT, depending on the level of profit made (taking into account your annual allowance of €1000 tax free gains). You can offset other losses against this.

Thanks, so what is combined percentage rate for the PAYE/USC/PRSI? I earn less than 32000. Also you say I may be subject to CGT dependant on the level of profit. What are the parameters for this?

Thanks in advance