Share Schemes

You can now create the required objects to manage share scheme taxation calculations, that includes Income Tax, USC and PRSI.

Element Template

To create share related calculation card, elements, balances and related formula use the element template.

Primary Classification: Taxable Benefits

Secondary Classification: Share Schemes

Based on this selection there are shares specific rules available.

Is this an approved share scheme? - If you select yes for this rule no Income Tax will be calculated, however employee will still pay USC and PRSI. The default is no, which means that the employee will pay Income Tax, USC and PRSI on the shares benefit amount.

Note: If there is a requirement for more than one scheme, for example one approved and one unapproved, multiple elements will be required.

Does Employer PRSI apply? - Employer PRSI does not apply if the shares are in the employer company or a company that controls that company so if the response to this question is yes,  then Employer PRSI will be calculated on the shares benefit amount.

What type of share scheme is this? - A lookup is provided with a list of share scheme types.

Note: The value entered here doesn't effect the calculation of the shares benefit amount. It can be used for information purposes.

Objects Created by the Element Template

Elements

The following elements are created based on the name entered:

  • <Base Name>
  • <Base Name> Results
  • <Base Name> Results Retro

Balances

The following balances are created based on the name entered:

  • <Base Name> Shares Based Remuneration
  • <Base Name> Shares Cost to Employer

Share Based Remuneration is fed by the calculated benefit to the employee (shares based remuneration input value).

Shares Based Remuneration feeds the following balances to ensure that statutory deductions are calculated correctly:

  • Income tax
  • USC
  • Employee PRSI base
  • Employer PRSI base (where applicable)

Shares Based Remuneration also feeds the following balances to ensure that the amount is included in the Payroll Submission:

  • Gross Pay – as part of data item 24
  • Employee PRSI base – as part of data item 27
  • Employer PRSI base (where applicable) – as part of data item 28
  • Taxable Benefits – as part of data item 47, but only if the shares are in companies that are not the employer company or a company that controls the employer company

Shares Based Remuneration itself is data item 46 in the Payroll Submission

Shares Cost to Employer will only be applicable if Employer PRSI applies.

Calculation Card

The element template will create the following calculation card definition when the secondary classifications is Share Schemes:

Calculation Card: Share Schemes

Calculation Component: Share Scheme Information

Calculation Component Details: Share Scheme Details

Share Scheme Details

To associate the calculation card to an employee select calculation card Share Schemes.

Create calculation component as <Base Name> of the element previously created.

Add information as required in Share Scheme Details.

Reporting Reference is a user entered reference for information.

Grant Date and Vesting Date are dates used in the calculation.

Exercise Price is the price for each share at the date of exercise, this will be multiplied by the number exercised in the calculation, but you can override the calculated amount by using Override Total Value.

The Amount Borne by Employee is the total amount paid by the employee as a voluntary deduction.

Example

Assuming that Approved Scheme has been selected and Employer PRSI has not been selected at element creation, to calculate the correct taxation the calculation card details should have the following items entered:

  • Grant Date

  • Vested Date

  • Number Vested

  • Exercise Price

  • Amount Borne by Employee

The taxation calculation should be triggered on vested date, when the fair market value can be calculated at the right date.

Example:

In November 2021, Philip’s employer granted him share options under an approved savings-related share-option scheme. The market value of shares at grant date is €6.25 per share. Philip’s employer sets the option price at €5 per share (a 20% discount).

A calculation card component/component details entry should be created to record the grant date and vesting date, 5 years later.

Without Number Vested, and Exercise Price no taxation calculation will be triggered.

After 5 years Philip exercises his option and buys 1,320 shares at €5 per share. The market value per share on the date of exercise is €15.

The calculation card component/component details entry should be updated to include the number vested (1320), the exercise price of 15.00 and amount borne by employee of 6,600.

The payroll calculation will be triggered at this point and, as the employee contributed €6,600, €13,200 will be added to the following balances in the period it is processed:

  • Share Based Remuneration

  • Gross Pay

  • Pay for Employee PRSI

  • USC Pay

Note: The contributions made by employees towards the cost of the shares, as voluntary deductions, and any refunds due, aren’t part of the share scheme solution.

This development will ensure that employers have all the necessary baseline functionality available to successfully configure and calculate Shares functionality in an Irish Cloud Payroll.

Steps to enable and configure

You don't need to do anything to enable this feature.