ESPP Tax Returns

Hi

I've been given conflicting advice on the tax return requiremets regarding ESPP.

Advice 1:
The amount of tax on the gain should be returned and paid 30 days from the date of exercise on a RTSO1 Form, and it is also included on your Form 12 income tax return and it shows on this return as being paid (same rules as for stock options).

Advice 2:
The purchase of shares in an ESPP is treated as a BIK for tax purposes and returned on a Form 12 income tax return in October of each year for the previous tax year. For example, purchase of stock from an ESPP in 2006 is included on the 2006 Form 12 which must be submitted and paid before the 31st October 2007.

Can somebody please confirm what the correct treatment is? I tried to ring the Revenue myself but the person I got didn't even know what an ESPP was!!

Thank you

Unless the scheme is Revenue approved with some facility for deferral of the tax liabilities arising then you definitely have to do the RTSO1 return/payment within 30 days. The nominal income arising from the discounted share price is not BIK (e.g. is not dealt with via payroll and is not subject to PRSI like most or all other BIKs). In the past ESPP nominal income made one an assessable individual which meant that you had to do a self assessed return for the year in question. I think that the rules on this changed more recently and only if the nominal income was more than €3,175 (?) did this happen and otherwise you remained PAYE. The main thing is to make sure that you at least to the RTSO1 return/payment on time. That way you have at least discharged the relevant liability.

I was researching the PAYE ESPP tax treatment threads today and found this. I have a question on how tax is calculated on ESPP share purchases.

I elected to purchase shares of the company I work for every month, and a fix percentage of my salary is deducted by payroll and used to purchase shares under the ESPP scheme. The shares are purchased at market value and a discount equal to 15% of the full market value is then applied.

My understanding of the taxation treatment is:
- The 15% is in effect the BIK part of this transaction;
- Tax at the appropriate current rate should be applied to this 15% every month;

My payslip indicates that ESPP BIK is retained at source, but the deduction for BIK seems much higher than the 40something% that I was expecting to be applied to the 15% discount.

Just to be clear, I am not interested in how tax works when I sell these shares, only in the BIK puchase scenario.

I am planning to send an enquiry mail to my payroll dept on Monday, but would like to have an idea of what AAMers think before sending.
Any advice greatly appreciated.