Finance Act 2019

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Amendment of section 128F of Principal Act (key employee engagement programme)

11. (1) Section 128F of the Principal Act is amended—

(a) in subsection (1) —

(i) by inserting the following definitions after the definition of “qualifying company”:

“ ‘qualifying group’ means, subject to subsection (2A), a group of companies that consists of the following (and no other companies):

(a) a qualifying holding company,

(b) its qualifying subsidiary or subsidiaries, and

(c) as the case may be, its relevant subsidiary or subsidiaries;

‘qualifying holding company’ means a company—

(a) which is not controlled either directly or indirectly by another company,

(b) which does not carry on a trade or trades, and

(c) whose business consists wholly or mainly of the holding of shares only in the following (and no other companies), namely, its qualifying subsidiary or subsidiaries and where it has a relevant subsidiary or subsidiaries, in that subsidiary or in each of them;”,

(ii) by substituting the following for the definition of “qualifying individual”:

“ ‘qualifying individual’, in relation to a qualifying share option, means an individual who throughout the entirety of the relevant period is—

(a) in the case of a qualifying group, an employee or director of a qualifying company within the group, and who is required to work at least 20 hours per week for such a qualifying company or to devote not less than 75 per cent of his or her working time to such a qualifying company, and

(b) in the case of a qualifying company not being a member of a qualifying group, an employee or director of the qualifying company, and who is required to work at least 20 hours per week for the qualifying company or to devote not less than 75 per cent of his or her working time to the qualifying company;”,

(iii) by substituting the following definition for the definition of “qualifying share option”:

“ ‘qualifying share option’, means a right granted to an employee or director of a qualifying company to purchase a predetermined number of shares in the qualifying company or, in the case of a qualifying group, in the qualifying holding company of the qualifying group, at a predetermined price, by reason of the individual’s employment or office in the qualifying company, where—

(a) the shares which may be acquired by the exercise of the share option are ordinary fully paid up shares in the qualifying company or, in the case of a qualifying group, in the qualifying holding company,

(b) the option price at date of grant is not less than the market value of the same class of shares at that time,

(c) there is a written contract or agreement in place specifying—

(i) the number and description of the shares which may be acquired by the exercise of the share option,

(ii) the option price, and

(iii) the period during which the share options may be exercised,

(d) the total market value of all shares, in respect of which qualifying share options have been granted in the qualifying company or, in the qualifying holding company, to an employee or director does not exceed—

(i) €100,000 in any year of assessment,

(ii) €300,000 in all years of assessment, or

(iii) the amount of annual emoluments of the qualifying individual in the year of assessment in which the qualifying share option is granted,

(e) the share option is exercised by the qualifying individual in the relevant period,

(f) the shares are in a qualifying company or, in the case of a qualifying group, in the qualifying holding company, and

(g) the share option cannot be exercised more than 10 years from the date of grant of that option;”,

(iv) by inserting the following definition after the definition of “qualifying share option”:

“ ‘qualifying subsidiary’, in relation to a qualifying holding company, means a company in respect of which more than 50 per cent of its ordinary share capital is owned directly by the qualifying holding company;”,

(v) by substituting “individual;” for “individual.” in the definition of “relevant period”, and

(vi) by inserting the following definition after the definition of “relevant period”:

“ ‘relevant subsidiary’, in relation to the qualifying holding company, means a company in respect of which more than 50 per cent of its ordinary share capital is owned indirectly by the qualifying holding company, but for the purposes of this section a relevant subsidiary in relation to a qualifying holding company shall not be regarded as a qualifying company.”,

(b) in subsection (2)(b), by inserting “or, in the case of a qualifying group, of the qualifying holding company,” after “qualifying company”,

(c) in subsection (2), by substituting the following for paragraph (c):

“(c) where a qualifying individual is permitted to exercise a qualifying share option despite having ceased to be an employee or director of a qualifying company, the individual shall be deemed to satisfy the requirements as set out in the definition of ‘qualifying individual’ in subsection (1) in respect of the period the individual is not employed by a qualifying company, where the individual exercises the option within 90 days of the individual ceasing to hold the employment or office concerned with the qualifying company.”,

(d) by inserting the following after subsection (2) —

“(2A) For the purposes of this section, a group of companies shall be treated as a qualifying group only where—

(a) throughout the entirety of the relevant period—

(i) there is at least one qualifying company in the group which is a qualifying subsidiary,

(ii) the activities of the qualifying group, excluding the qualifying holding company, consist wholly or mainly of the carrying on of a qualifying trade,

(iii) each company in the qualifying group is an unquoted company none of whose shares, stock or debentures are listed on the official list of a stock exchange, or quoted on an unlisted securities market of a stock exchange, other than on—

(I) the market known as the Enterprise Securities Market of the Irish Stock Exchange, or

(II) any similar or corresponding market of the stock exchange in—

(A) a territory, other than the State, with the government of which arrangements having the force of law by virtue of section 826(1) have been made, or

(B) an EEA state other than the State,

and

(iv) each company in the qualifying group is not regarded as a company in difficulty for the purposes of the Commission Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty¹ ,

and

(b) at the date of grant of the qualifying share option—

(i) the qualifying group is a micro, small or medium sized enterprise within the meaning of the Annex to Commission Recommendation 2003/361/EC of 6 May 2003² concerning the definition of micro, small and medium sized enterprises, and

(ii) the total market value of the issued, but unexercised, qualifying share options of the qualifying holding company does not exceed €3,000,000.”,

(e) by deleting subsection (4),

(f) in subsection (5) —

(i) in paragraph (a), by inserting “or, in the case of a qualifying group, of the qualifying holding company,” after “qualifying company”,

(ii) in paragraph (b), by inserting “or, in the case of a qualifying group, in the qualifying holding company” after “company” in both places where it occurs,

(iii) in paragraph (c)(ii), by deleting “paragraphs (a) and (b) of”, and

(iv) in paragraph (c), by substituting the following subparagraph for subparagraph (iii):

“(iii) throughout the relevant period, the company is a qualifying company or, in the case of a qualifying group, the holding company is a qualifying holding company.”,

(g) by substituting the following for subsection (7):

“(7) Where in any year of assessment a qualifying company grants a qualifying share option under this section, allots any shares or transfers any asset in pursuance of such a right, or gives any consideration for the assignment or release in whole or in part of such a right, or receives notice of the assignment of such a right, the qualifying company shall deliver particulars thereof to the Revenue Commissioners, in a format approved by them, not later than 31 March in the year of assessment following that year.”,

(h) by inserting the following subsection after subsection (7):

“(7A) Where in any year of assessment a company within a qualifying group grants a qualifying share option under this section, allots any shares or transfers any asset in pursuance of such a right, or gives any consideration for the assignment or release in whole or in part of such a right, or receives notice of the assignment of such a right, a qualifying company designated by the qualifying group shall deliver particulars thereof on behalf of the qualifying group to the Revenue Commissioners, in a format approved by them, not later than 31 March in the year of assessment following that year.”,

(i) in subsection (8) —

(i) by inserting “, or, as the case may be, qualifying groups” after “qualifying companies”, and

(ii) in paragraph (a) by inserting “or, in the case of a qualifying group, of each member of it and a subsequent reference in this subsection to a ‘company’ shall, as appropriate, be construed as including a reference to each such member” after “company”,

(j) by substituting the following subsection for subsection (10):

“(10) A company or group shall not be regarded as a qualifying company or, as the case may be, a qualifying group for the purposes of this section where the company, or in the case of a qualifying group, the company designated for the purposes of subsection (7A), fails to comply with subsection (7) or (7A)”,

and

(k) in subsection (11), by substituting “a qualifying company” for “the qualifying company”.

(2) Subsection (1) shall come into operation on such day or days as the Minister for Finance may appoint by order or orders, either generally or with respect to different provisions or purposes.

¹ OJ No. C249, 31.7.2014, p. 1

² OJ No. L124, 20.5.2003, p. 36