Tax on discounted shares - can I use BIK ?

[jrewing]

This month my company issues shares in its 6-monthly discounted share scheme (not a Revenue approved scheme).

I have paid a fixed %age of my salary every month, and at the end of six months, I get shares at the lower of the initial/final price less 7.5%. So far, so good...

As far as I know, the difference between the price I pay for the shares and the market price on the day I buy them (i.e. the final price) is taxable at the marginal rate.

How do I make this return to the Revenue Commissioners ? It's not a stock option, so the RTSO1 is not strictly applicable. Can I I get my employer to treat it as a BIK, thus taxing it through the payroll ?

 

[ClubMan]

It's not a stock option, so the RTSO1 is not strictly applicable.

I think you still use RTSO1 all the same or maybe a P11D. Revenue don't always distinguish that carefully between stock options, stock grants, option schemes, purchase schemes etc. See [broken link removed]:

10.1 Company Shares

Where shares in a company are given by the company
to an employee free of charge or at a discounted price
or under a share scheme, the employee is chargeable
to tax on the benefit accruing to him or her. However,
PAYE and PRSI do not apply. Instead, the benefit must
be returned on the employee’s return of income form.
The employer must also make a return of the
benefit on form SO2 or form P11D, whichever is
appropriate, by the appropriate due date.

Can I I get my employer to treat it as a BIK, thus taxing it through the payroll ?

Even if that's possible (and I don't think that it is) you don't want to do that as then you'll probably end up paying PRSI/health levy as well which would leave you out of pocket. I think that for non PAYE income (such as this nominal income attributable to the discount on a share grant) under a certain limit (c. €3,175 I think) you can write to Revenue requesting that they deal with any liabilities through a reduction of your tax credits. In this case you may need to estimate in advance the potential nominal income and then balance things up at the end of the year. On the other hand I wrote to Revenue asking them to do this in respect of nominal income from my employer's ESPP but they never got back to me.

As ever - if in doubt get professional advice.