New employer reporting requirement for certain share schemes 

Section 8 of the Finance Act 2020 introduced new reporting requirements in respect of share awards or a cash equivalent of shares to employees and directors.  There is now a much wider requirement for employers to provide Revenue with information on existing share plans via a new electronic format, the Employer’s Share Awards (ESA) return. The new return will apply for the 2020 tax year onwards with a filing deadline of 31 August for the 2020 return. For subsequent years, the reporting deadline will be 31 March following the end of the relevant tax year.

Prior to Finance Act 2020, Irish tax legislation included share scheme reporting provisions with a requirement for filings by 31 March. These reporting requirements only applied to approved share plans and share option plans. While there was a requirement for employers to report other share remuneration via payroll, there was no explicit requirement to provide a detailed breakdown of each item or disclose the calculation supporting the payroll entry in a stand-alone reporting format.

eBrief No. 103/21 confirmed that the ESA return will include restricted stock units (RSUs), restricted shares, convertible shares, forfeitable shares, discounted shares and any other awards of the cash-equivalent of shares. Revenue confirmed the format of the new ESA return to be very similar to the existing KEEP1, RSS1 and ESS1 electronic returns and a pre-formatted spreadsheet has now been made available which can be uploaded through ROS. 

The introduction of Revenue’s PAYE Modernisation allowed for real-time payroll reporting and provided Revenue with real-time visibility over employee remuneration for the very first time. The new ESA return will further increase Revenue’s visibility over employee remuneration. 

The compilation of the detail and information required to complete the ESA return will present employers with a significant time-intensive task, particularly for employers with a large number of employees in Ireland. The share remuneration will have already been reported and taxed via payroll on a real time basis and the new reporting obligation post year-end will create an additional administrative burden for many companies which we understand Revenue had sought to reduce. It would seem more administratively convenient for such details to be included in standard payroll submissions rather than in a separate report.

Another complexity involved would be the retrospective nature of the filing for 2020, particularly given the timing of the form issuing of the form by Revenue and the deadline. The requirement to report this information was only first raised in Finance Act 2020 which was signed into law in December 2020 and clarifications of the actual content were only made some time after this. On this basis employers were not afforded sufficient time or opportunity to make the necessary changes to internal processes and procedures in 2020 which would assist in the completion of the reporting obligation. It would have been preferable for any new requirements to apply in relation to reporting requirements on or after 1 January 2021.

In any case, the first reporting deadline of 31 August 2021 is fast approaching, and it is important that employers start the necessary preparation and planning. The priority will evidently be collating details of all 2020 share rewards (including any cash awards) and determining the information required to be disclosed in the ESA return. It would also be important to take steps for the 2021 tax year and beyond and consider what internal processes and procedures that could be implemented now to aid the preparation and completion of future returns. The return for the 2021 tax year will be due to be filed by 31 March 2022, which does not allow a lot of time post year-end to prepare and file the return. 

For many large employers in Ireland, there will be a variety of share schemes and likely a number of sections within the pre-formatted spreadsheet which will be required to be completed. Employers should now identify; the individuals who will be internally responsible within the organisation to submit the return and if the required information is readily available. 

This article first featured in Finance Dublin in August 2021 and was re-published kindly with their permission on our website.