A qualifying company with employees in Ireland may operate an Irish Revenue-approved SAYE plan, enabling the company to grant options – linked to three or five-year savings contracts – over shares in that company or, in the case of a group plan, its holding company.
This guide gives an overview of the Irish SAYE regime and the differences between the UK and Irish regimes.
Irish SAYE plans
As with UK SAYE plans, an Irish SAYE plan may only be operated over shares in a listed company, an independent company or a company which is under the control of a listed company. All eligible employees must be invited to participate.
Participants must sign up to a three or five-year savings contract with an authorised 'savings carrier' (see below) selected by the company, which will generally add a tax-free bonus to the participant's savings at the end of the savings period. The participant may then - but is not required to - use the proceeds of the savings contract to exercise the SAYE option.
The Irish Revenue Commissioners must formally approve a plan before it can be operated, and the approval process applies also for documents used on launch and maturity.
These include:
- copies of all documents that will be issued to participants in the scheme i.e. Letter of Invitation, Application Form, Option Certificate, Notice of Exercise of Option, Employee Booklet etc.,
- a copy of save as you earn certified contractual savings scheme Prospectus and Application Form
Principal differences between Irish and UK SAYE plans
- The maximum amount that can be saved under all SAYE savings contracts in Ireland is €500, as opposed to £500 under a UK SAYE plan. The minimum is €12. The monthly contribution is fixed at the start of the contract and cannot be changed.
- A discount of up to 25% of the current market value of the shares may be applied in determining the option exercise price, as opposed to a maximum 20% discount under a UK SAYE plan.
- If a company decides that only employees with a specified minimum period of service with the company are eligible to participate, the maximum such period which may be specified in Ireland is three years - as opposed to five years under a UK SAYE plan.
- Participants who apply for a five-year savings contract may be allowed by the company to choose at the outset to allow their savings to remain with the savings carrier for a further two years and, where a bonus is payable, potentially be credited with an additional bonus. This additional two-year period is not available in UK SAYE plans.
- If the company is a 'close company' (which is a technical term applicable to companies broadly speaking under the control of five or fewer shareholders), the percentage shareholding that an employee is allowed to hold before being deemed to have a "material interest" and so not being eligible to participate is 15%. There is no material interest restriction for a UK SAYE plan.
- A retirement age of between 60 and 66 must be specified in the plan rules in order to allow early exercise of the share option following retirement or continuing in employment on reaching that age. No retirement age can be specified for a UK SAYE plan.
- Early exercise is only permitted on reaching the specified retirement age. In a UK SAYE plan, early exercise is permitted on retiring at any time, and it will be for the employer to determine whether, in the circumstances, the employee has "retired".
- Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) apply on any gain made on the exercise of SAYE options. In the UK, there are no National Insurance contributions to pay on the exercise of SAYE options.
Appointing a savings carrier
The appointed savings carrier (a bank or building society) must have a certificate from the Irish Revenue Commissioners authorising it to operate SAYE contracts and approving the formal terms applicable to such contracts (the SAYE prospectus). A copy of this authorisation certificate must be filed by the company or its agent with the Irish Revenue Commissioners as part of the formal approval process for an Irish SAYE plan.
Bonus amounts
Bonus rates in both the UK and Ireland are typically given as a multiple of the participant's monthly savings contribution. However, the regulations governing the operation of Irish SAYE savings contracts permit the savings carrier to choose the amount of bonus payable on completion of a three or five-year savings contract, or on early withdrawal (in each case up to a maximum permitted amount). The bonus and interest rates selected by the savings carrier are included in that carrier's approved Irish SAYE prospectus.
This is very different from in the UK, where these bonus rates are fixed by HMRC and can only be increased or decreased (for new contracts only) by reference to the Bank of England’s bank rate.
Participants in Irish five-year SAYE plans may be allowed by the company to choose at the outset to allow their savings to remain with the savings carrier for another two years and be credited with an additional bonus. Again, this bonus will be up to a specified maximum amount. This additional two-year period is not available for UK SAYE plans.
Employee documentation
The savings carrier will often have its own standard employee documentation, usually consisting of an application form, option certificate, notice of exercise and application for repayment of savings and an employees' booklet. All this documentation must be approved by the Irish Revenue Commissioners when a plan is first established. Approval is only required subsequently where the wording in the communication would be considered an alteration to the scheme, which requires prior approval.
Annual returns
A report must be made to the Irish Revenue Commissioners in relation to an Irish SAYE plan every calendar year, which is the Irish tax year. The form (Form SRSO1) on which this annual return should be made is available to download from the Revenue Commissioners' website but must be returned in hard copy by 31 March following the end of the year in question. Information the company will need to report includes:
- details of options granted and exercised (and by whom);
- numbers of eligible employees; and
- how the exercise price for a grant of share options was determined.
The savings carrier may include the completion of this return in its services, and this should be checked before the carrier is appointed.
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