Key Employee Engagement Programme 'gets it 85% correct'

Updated / Friday, 20 Oct 2017 13:25

Conor Brophy talks to Gill Brennan, chief executive of the Irish Pro Share Association, about the new KEEP scheme for SMEs

The details of the new Key Employee Engagement Programme were set out in the Finance Bill yesterday. The "KEEP" scheme is aimed at making it easier and more tax efficient for small and medium sized companies to grant share options to staff. 

Gill Brennan, chief executive of the Irish Pro Share Association, said the KEEP programme is aimed at retaining and attracting staff to work in SMEs and will help SMEs to keep those employees that "matter the most" and thus ensuring growth of the business. Ms Brennan said the scheme goes "85% of the way" to meet that the association had lobbied for and is a step in the right direction. But the Finance Bill did not contain some of the things the Pro Share Association had hoped for, including entrepreneurs relief, which is available in the UK under a similar scheme.

Explaining the changes, Ms Brennan said that people had to pay tax immediately when they were granted share options, but under the new provisions of the Finance Bill, they will just have to pay capital gains tax when the shares are actually sold. Entrepreneurs relief would have seen a lower rate of capital gains tax being paid, she added.

According to Gill Brennan, the issue that was stopping SMEs from offering share ownership, or part ownership, of their business to key employees was the fact that once those shares were actually granted, the employee was liable for tax on something they could not liquidate - basically they would have had to pay tax on "thin air". She said a lot of SMEs had told her association they wanted to keep their key employees by offering them a share of the business, but this would have resulted in a tax liability on them. This was not fair, she stated. 

One of the reasons behind the KEEP scheme was the need for SMEs and the country in general to become more competitive, especially in relation to the UK. Ms Brennan said the rate of capital gains tax here is not in line with the UK rate, while the limit of how much can be actually granted to employees from the business is also different. The legislation in the UK caps this amount at £3m. She said the Government has used the €3m figure, but added that this figure failed to take the exchange rate into consideration.

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