Tax question on shares allocated to me by company

R

Raul

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Hi folks,
I searched previous threads which were able to answer a lot of my questions but I still have some questions about tax. All the key questions are in bold in between all the waffle!

1. I am given a certain amount of shares by my company every year and they vest over a 4 year period. i.e. if they me 1000, 250 vests after year 1 etc... My first set of shares vested this year and I want to fill in a tax return for this. I know I have to pay 41% income tax on this.

A lot of my colleagues aren't sure of this as they haven't done it yet themselves. I know I have until October next year to pay it but I want to get it out of the way. I went on to Revenue.ie and I think the form I need to fill in is Form 11 (could be wrong) but there are only relevant forms for 2007 backwards. Do I have to wait until next year to pay tax returns for 2008? If anybody has a link to the correct form, I'd be much obliged.

2. I registered for ROS and have already got money back for 2005 after requesting a P21. I owe them €180 for 2006 but they said they are not going to follow up on this now. What is the likelihood of them looking for this in future? I need to call them about 2007 as I am not allowed to request it online due to pay tax on other shares (I think that's the reason anyway). Is there any way of knowing whether I would owe them money or expect a refund for 2008 in advance?

3. Are all the basic tax credits deducted at source such as PAYE credits? I see a section on ROS which detail all my credits but I've no idea if I have received them. I think the answer is yes but I want to check anyway :) I know you need to register for rent relief, medical expenses etc.
 
Ok it looks like you're talking about share options....

Assuming you are certain about the 41% income tax being liable on these shares then I would assume you are part of an unapproved share option scheme.

Firstly, you should note that if it is indeed an unapproved share option scheme you are part of then you are liable to pay 41% tax on these shares within 30 days of exercising the option to purchase. You will then be given credit of the tax paid when you are filing your income tax return (Form 11).

In the above situation you are liable to 41% tax on the difference between the grant price and the market price on day of exercise. Then when you sell the shares your base cost for CGt purposes will be the market price on the day of exercise.

Secondly, yes tax credits such as the PAYE tax credit are deducted at source through the PAYE system. Every year both yourself and your employer receive a certificate of tax credits which gives a breakdown of your tax credits of the year. Other tax credits for service charges etc can also be include on this certificate of tax credits.

It is unlikely that Revenue will pursue you for the balance of tax due in 2006. However, this is totally at the discretion of the Revenue Commissioners.

Depending on the amount of money involved you might think of seeking professional advice regarding the share option query.

Investments may fall as well as rise!!!
 
Thanks for the reply and clarification.

Actually they are not share options. These are called Restricted Stock Units where they actually give you a certain amount of shares. They are not options where you can buy shares at a certain price. It is an approved scheme and I am pretty sure it is taxed at 41%. Do I have to wait until 2009 to file tax returns for 2008?
 
Raul said:
Thanks for the reply and clarification.

Actually they are not share options. These are called Restricted Stock Units where they actually give you a certain amount of shares. They are not options where you can buy shares at a certain price. It is an approved scheme and I am pretty sure it is taxed at 41%. Do I have to wait until 2009 to file tax returns for 2008?
Click to expand...

I pasted a tax briefing on RSU's below. Hopefully this should help you with any queries you have.

Income Tax treatment of Restricted Stock Units given to office holders and employees
Overview
In recent years, the award of shares and the entitlement to a future award of shares is made through a variety of schemes. One such scheme is known as Restricted Stock Units (RSUs).

Whilst each case has to be examined on its merits to determine the correct tax treatment of the relevant unit, the following tax treatment will, in general, apply.

Restricted Stock Units (RSUs)
A Restricted Stock Unit is a grant (or promise) to an employee to the effect that, on completion of a 'vesting period', he/she will receive a number of shares or cash to the value of such shares (i.e. in general, no shares or cash value of such shares will pass to the employee until the 'vesting period' has passed). A restricted stock unit is, generally, evidenced by way of a certificate of such entitlement.

The 'vesting period' is the period of time between the date of the grant (or promise) of the shares (or of the cash value of such shares) and the date on which the vesting condition is satisfied. Vesting periods are usually satisfied by, for example, the passage of time or by the individuals' employment performance

Tax treatment of RSUs
An RSU is not a share option to which Section 128 TCA 1997 applies but rather is a taxable emolument of the employment chargeable to income tax under Schedule E (Section 112 TCA 1997) or Case III of Schedule D, as appropriate.

Where chargeable to income tax under Schedule E:

(a) The receipt of shares/stock in the company in which the individual holds his/her office or employment (or shares in a company which has control (within the meaning of Section 432 TCA 1997) of that company) is not within the scope of PAYE - see Section 985A TCA 1997; and

(b) The receipt of shares other than shares referred to in (a) and / or cash is within the scope of PAYE.

Timing of taxation of awards of RSUs
The income tax liability of the shares (or the cash amount of such shares) arises either:

(a) On the date of vesting (rather than on the date of the grant) of a restricted stock unit; or

(b) Where the shares or cash pass to the employee on a date prior to the date of vesting, on that prior date.

Payment of dividend equivalents
In some instances, employees granted an RSU may be entitled to amounts equivalent to the dividends accruing to the shares promised under an RSU. Such dividend equivalents are taxable emoluments. The rules of the RSU will usually determine the year of assessment although, in general, the year of assessment is likely to be the year of payment.
 
Thanks Mini. Do you know if I can pay the tax now for 2008 or do I need to wait until 2009? Is it form 11 I need to use?
 
When were the shares were vested to you? If vested to you this year (2008) then the tax is due on them by 31 Oct of this year. Form 12 is the appropriate form from what I have worked out though there is some confusion within Revenue on how to treat RSUs.

using Mini3277's quote from revenue web site, its Option:

" b) The receipt of shares other than shares referred to in (a) and / or cash is within the scope of PAYE "

that you should be working against.

Revenue have told me that when you submit the form 12, you should also send in this particular tax briefing from their own website and highlight the Option B part. This is due to the confusion over RSUs within Revenue.

They sure don't make it easy when Revenue staff themselves don't even know how to handle tax affairs.
 
Johnboy45 said:
When were the shares were vested to you? If vested to you this year (2008) then the tax is due on them by 31 Oct of this year.
Click to expand...

I am pretty sure I have until Oct 31st 2009 to pay the tax on my RSUs which vested this year. I will ring Revenue tomorrow to hear it from the horses mouth. Thanks to all who replied.
 
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