KEEP amends welcomed but further action on share valuations could have been taken
Finance Bill 2019
Company cars - Bill introduces a new regime of taxation based on emission levels of the car from 2023 onwards
Commenting on the amends to the Key Employee Engagement Programme (KEEP) in Finance Bill 2019, Daryl Hanberry, Partner, Tax, Deloitte commented:
The KEEP scheme was introduced to assist small growing companies recruit and retain employees through the provision of share options. There has been a relatively low uptake due to a number of administrative barriers. Therefore it is welcomed that the Minister has taken some action to make the KEEP scheme more attractive to employers by amending the restrictions in relation to holding companies, the use of existing rather than just new shares and reducing the hours required to be worked by an employee. This latter change will allow the relief to extend to part-time workers who work reduced hours on a permanent basis. The expansion of the definitions of holding companies will allow qualifying companies to grant options over shares in the parent company, albeit there is still some uncertainty around what activities the holding company can carry on.
That said we believe that further action could have been taken. It is disappointing that there is no move towards providing a safe harbour in relation to share valuations. We recognise that Revenue may not wish to formally approve valuations on an ongoing basis for KEEP. However as an alternative, Revenue could develop and issue guidance on appropriate valuation methodologies to support SME companies in adopting KEEP. In the absence of such guidance companies may see the cost of valuations, which are required at the outset and on the grant of new tranches of options, as too high to allow them to utilise KEEP.
Benefit in Kind (BIK) on Motor Vehicles
In line with the green agenda, the Minister has extended the BIK exemption on company electric vehicles until 31 December 2022 and also, in a new measure not previously announced as part of the Budget, introduced a new regime of taxation based on the emission levels of company cars from 2023 onwards.
The BIK exemption for electric vehicles is a significant measure and one of the few benefits that can be provided to employees free from tax. The new emission regime is broadly based on one which was announced over a decade ago in 2008 but was actually never fully enacted. It will impact those who drive less environmentally friendly vehicles where the amount subject to tax can reach up to 37.5% of the open market value of the car.
Reflecting overall on the measures relating to global employment taxes, Hanberry concluded: “Notwithstanding the level of uncertainty surrounding the Finance Bill and Budget, this has very much been a lost opportunity to put Ireland in a strong competitive position from an impact tax perspective vis-à-vis other countries who are competing for inward investment. While the Special Assignee Relief Programme and the Foreign Earnings Deduction were extended by two years to 2022, no other enhancements were introduced despite a detailed public consultation process.
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