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IPSA welcomes Government commitment to incentivise employee share options for SMEs with KEEP reform

By February 10, 2022No Comments

The Irish ProShare Association has welcomed the Government’s commitment to make it easier for start-ups and SMEs to use share scheme incentives to attract and retain employees.

It comes after Minister for Finance Paschal Donohoe said the Government is looking to implement changes to the Key Employee Engagement Programme (KEEP) in the Budget. The comments came when he and the Tánaiste launched a new €90m innovation seed fund for start-up businesses this morning.

Tánaiste Leo Varadkar, the Minister for Enterprise, Trade and Employment, said: “Among the things we’re considering at the moment is whether we can do something around share options around capital gains, to encourage small business to incentivise their employees, using that mechanism, when they aren’t able to match the kind of large salaries that large companies are in a position to offer.”

Paschal Donohoe said: “The next part of plan is where we are with share options which, particularly for smaller Irish companies, is an issue that is more important than it is for larger companies. We began assessing where we are with the KEEP scheme at the moment, which is how we recognise and tax share options. That is something that we would consider for the forthcoming budget, which seems along way away but I know in order to get ready for it we need to be working now and that’s underway at the moment.”

IPSA takes the view that KEEP has under-performed since it was introduced as part of Budget 2018 and that significant reform is needed to make it viable.

IPSA Chair Eleanor Cunningham

IPSA Chair Eleanor Cunningham: “KEEP was introduced in Budget 2018 to help smaller companies attract and retain staff in competition with bigger rivals who could offer larger salaries. It was supposed to make it easier for start-ups and SMEs to offer employees equity in the companies they were helping to build in a tax efficient manner.

“Unfortunately, KEEP in its current form is far too complex. It has onerous qualifying restrictions and limitations, there are difficulties navigating the scheme, and the costs associated with establishing KEEP are excessive for start-ups

“These issues have been there from the start. Amendments were made to KEEP in the Finance Act 2019, but the commencement order has not yet been signed to give effect to these changes. These updates covered issues such as the definitions of qualifying groups, qualifying holding companies, qualifying individuals, and qualifying share options.

“As long as these and other issue remain unaddressed, the lack of usability and ambiguity associated with certain aspects of KEEP will continue to be contributing factor to the poor uptake of the scheme nationwide. Many companies have looked at KEEP, but very few have implemented it.

“IPSA welcomes the Government’s commitment to make it easier for start-ups and SMEs to provide share scheme incentives for their employees. We believe KEEP can be at the heart of that and can become an invaluable tool for small business – but only if it is significantly reformed to ensure that it can be easily understood and implemented by the companies it is intended to serve.”

Irish Independent: Government mulling tax boost for share options in Budget