The Minister for Finance, Michael McGrath, has commenced four amendments to the Key Employee Engagement Programme (KEEP) scheme which were introduced in Finance Act 2022.
The measures are designed to enhance KEEP in order to boost uptake of the scheme. They reflect feedback the Government received from stakeholders, including IPSA, following poor engagement with the scheme after it was introduced in 2018. The amendments provide for the following:
- The extension of KEEP from the end of this year to the end of 2025.
- To allow shares that are acquired on foot of a KEEP option and are subsequently redeemed, repaid or purchased by the company to qualify for KEEP in certain circumstances.
- The increase of the limit for the total market value of issued but unexercised qualifying share options for qualifying companies and qualifying holding companies from €3m to €6m.
- Changes to the types of shares that qualify for KEEP from new ordinary fully paid up shares to ordinary fully paid up shares, so that the award of existing shares in a company can qualify for relief.
The amendments were introduced after the Government received formal state aid approval from the European Commission.
Mr McGrath said: “KEEP is a focused scheme aimed at improving the attractiveness of the Irish SME employment offering. It recognises that the improved competitiveness of Irish SMEs supports the creation and maintenance of employment, which in turn supports economic growth.
“These amendments extend and expand the current KEEP scheme, and are based on my Department’s continued engagement with stakeholders to ensure that the scheme is working to support Irish SMEs.”
KEEP is a tax efficient share option scheme, introduced in 2018, and was designed to facilitate the use of share based remuneration by unquoted SME companies to attract key employees. Under the scheme, employees are given an option to acquire shares at a future date, at a fixed price.
Employees who exercise KEEP options are exempt from a liability to Income Tax, USC and PRSI on any gain arising, however they pay Capital Gains Tax on subsequent disposal of the shares acquired. In addition, as is generally the case with share-based remuneration schemes, shares awarded through KEEP are exempt from employer PRSI.
IPSA Chair Marie Flynn said: “IPSA welcomes the commencement of these amendments to KEEP. They are significant and positive changes which should further help make the scheme more attractive to those it is designed to help.”