Giving equity to employees is a great way to grow a business, but the paperwork associated with this has changed and employers must now comply with a mandatory online reporting obligation. If you offered share ownership to employees in 2022, you must report this via ROS before 31st March 2023, and every year by the same date. Read on to see what’s involved.
Share Scheme Reporting (SSR) in Ireland
There are various annual reporting obligations in place for businesses operating share schemes, but some schemes did not have a prescribed reporting format. The big change is that Employer’s Share Awards (ESA) must now be reported through the online submission of the relevant Share Scheme Reporting (SSR) form – just like other schemes already are, via ROS. You may also have seen this referred to as ‘electronic reporting’. Previously, you could report ESA via a paper form (also called ESA) but this is no longer possible.
The SSR Form ESA must include information about share awards made to employees, such as the number of shares awarded, the exercise (or strike) price of the shares, and the fair market value of the shares at the time of the award. The report must also include information about the employee, such as their name, PPS number, and the date of the share award.
It is important to note that a report must be filed even if no tax is due on the share award. Also, any difference between the exercise price and the fair market value of the shares at the time the option is exercised is considered a benefit in kind and is subject to income tax and contributions.
Submitting a Form ESA online
The Employer’s Share Awards return (Form ESA) should be downloaded from the Revenue website, completed offline, and then uploaded to Revenue Online Service (ROS). It is a pre-formatted spreadsheet rather than a PDF and because it uses macros you can only edit it on a Windows computer using Microsoft Excel. The return contains detailed instructions on how to complete the form and upload it to ROS. Additional step-by-step instructions for registering and filing these returns on ROS are available in Revenue’s documentation, Chapter 15 – Filing Guidelines for Share Scheme Reporting.
Which is the right form for Share Scheme Reporting?
There are a wide variety of share schemes out there, many of which are reported through the Form ESA, but not all! To help you get started, here is a breakdown of the forms available and their purpose.
|Form||What is it for?|
|ESA||Restricted Stock Units (RSU) share-settled, Restricted Stock Units (RSU) cash-settled, discounted shares, free shares, matching shares, Employee Share Purchase Plans (ESPP), restricted shares, convertible securities, forfeitable shares, phantom shares, stock appreciation rights, other cash awards whose value is based on the value of specified stock, growth/hurdle/flowering shares, and any other award with a cash payment equivalent to shares (i.e., cash settled plans).|
|RSS1||Unapproved share options and other rights.|
|KEEP1||Key Employee Engagement Programme (KEEP) share options.|
|ESS1||Approved profit share schemes (APSS) schemes.|
|SRSO1||Save As You Earn (SAYE) schemes.|
|ESOT1||Employee Share Ownership Trusts (ESOT) schemes.|
It’s a good idea to consult the extensive documentation provided by Revenue; you can start with their tax and duty manual reference for share schemes. These documents will help you understand the kind of information required and where a different form might be needed, for example:
Reporting growth shares
You must report details of share awards for any year growth shares are awarded. Details of growth shares forfeited must be reported under the relevant columns of the Forfeitable Shares section of the Form ESA in the return year when they are forfeited.
Reporting convertible securities
You must report the following information on the Form ESA:
- Details of all awards of convertible securities made to employees and directors in the return year when the securities are awarded.
- Details of any chargeable events in the return year when they occur.
Reporting Employee Share Purchase Plans (ESPP)
Where an ESPP is a share option scheme, details should only be reported on the RSS1 return (not the Form ESA).
Reporting forfeitable shares
You must report the following information on the Form ESA:
- Details of all awards of forfeitable shares in the return year when the shares are awarded.
- Details of any forfeiture of shares in the return year the shares are forfeited. This also includes the forfeiture of growth or hurdle shares, shares awarded under a RSU and restricted shares under Section 128D forfeited after the end of the specified period.
Sometimes, the share award may be a combination of different type of shares. In those cases, the reporting of the award and the reporting of the forfeiture may take place under different tabs of the Form ESA file.
Reporting shares acquired at less than market value (undervalue), notional loans, and disposals for greater than market value
You must report details of any award of matching shares, shares free of charge, shares at undervalue or a discounted price on the Form ESA. The reporting obligation arises in the year the award is granted.
Reporting restricted shares
Where the restricted shares are acquired on the exercise of a share option (in accordance with the provisions of section 128) you must report details on the RSS1.
In any other case, you must report the following information on the Form ESA:
- Details of an award of restricted shares in the return year the award is granted.
- Details of any disposal of restricted shares before the end of the specified period in the return year the disposal takes place.
- Details of forfeiture of restricted shares after the end of the specified period in the return year the forfeiture takes place.
You must register before you can submit via ROS
You will have to register to submit these reports. Once logged into ROS, select “Manage Reporting Obligations” under the Other Services section in the main “My Services” area of ROS and follow the steps from there.
If your accountant is going to file these returns on your behalf, you won’t need to worry about registering on ROS as they will do this themselves.
This new reporting obligation is mandatory and there are penalties for non-compliance. Revenue is also able to withdraw approval of a share scheme if an organisation doesn’t comply with its reporting obligations.
Don’t assume your accountant will handle this for you unless you have specifically asked them to do so. You will have to keep them informed of any and all share awards throughout the year so that they can file accurate report(s) in a timely fashion.
Taxation of shares – who is responsible?
The guidance on the taxation of share options and share awards provided by Revenue was also updated recently. Revenue has been concerned that companies operating share-based remuneration schemes may have not made employees fully aware of their tax obligations when participating in a share scheme.
In Ireland, it is the employee and not the employer who is responsible for reporting (on Form RTSO1) and paying any taxes arising upon exercise of their share options (which must be reported and paid within 30 days of exercise). More information is given in this notice, Share Schemes – Employee Information.
Make sure you meet your reporting obligations
As you can see from the above, this is quite a complex reporting area. If you are a Beyond client and would prefer us to handle reporting for you, ask us about adding this service to your package. Because we will need to register for this on ROS and gather various pieces of information to make an accurate return, we require at least three weeks’ notice before the deadline of 31st March.