Revenue has confirmed updates to Chapter 03 of the Tax and Duty Manual on unapproved share options. The revisions – contained in eBrief No. 221/25 – are important clarifications for employers and advisers operating or designing share-based incentives outside approved schemes.
The most significant confirmation relates to employer responsibilities. Revenue has clarified that where a “long” share option gives rise to a tax charge on grant, it is the employer – not the employee – who is responsible for submitting the tax. Where tax is charged at grant, the guidance also confirms that employers may apply a payroll credit when the option is subsequently exercised, easing the risk of double taxation.
The updated manual also addressesinternational and mobile employees. It clarifies how gains should be reported on the RSS1 where an individual is taxable in Ireland on only part of the option gain under a double taxation agreement. This is particularly relevant for multinational groups and companies with cross-border assignees.
In addition, outdated references toindexation reliefon shares acquired before 2003 have been removed, aligning the guidance with current capital gains tax rules.
Taken together with the move to PAYE which was introduced by Finance Act 2023 for post-2023 exercises, the updates clarify some employer concerns and reinforce that unapproved share options are now firmly embedded in the PAYE and employer-withholding framework. While this reduces administrative and cash-flow burdens for employees, it places greater compliance and governance obligations on employers.
Revenue tightens guidance on Restricted-Share schemes
Revenue has updated its guidance on restricted shares in its Share Schemes Manual: Chapter 08. Key revisions – contained in eBrief No. 219/25 – take effect immediately.
The most important change is that where restricted shares are held in an arrangement other than a trust, they now require prior Revenue approval to qualify for the tax-favoured “clog” regime. Previously, the rules did not emphasise this condition so clearly.
Furthermore, Revenue has clarified that disposal restrictions must apply both at grant and throughout the entire restriction period. If shares are transferred or disposed of before the end of that period (except in narrowly defined circumstances such as death or certain company reorganisations), the transaction may breach restricted-share status – triggering a full income tax clawback rather than the 10-60% abatement under section 128D TCA 1997.
For those designing or operating restricted-share plans, these updates underscore the necessity of:
- obtaining Revenue’s pre-approval for non-trust based restricted-share arrangements;
- ensuring legally binding, documentation of disposal restrictions;
- maintaining compliance over the full restriction period to preserve favourable tax treatment.
Failing to meet these requirements risks disqualification and full denial of the relief – making robust documentation and process control essential.
