1. 24 March 20091 Review of Approved Profit Sharing Scheme Kathleen Corley Revenue Commissioners

2. 24 March 20092 Review of Approved Profit Sharing Scheme Legislation introduced in 1982 Key principles –all employee –similar terms Revenue concerns Review of administrative practices

3. 24 March 20093 Review of Approved Profit Sharing Scheme IPSA submission Use of bonuses –Fixed –Discretionary –Sales commission –Team bonuses Certain other agreed payments

4. 24 March 20094 Review of Approved Profit Sharing Scheme Carry forward of contributions –Salary forgone –Contributory schemes Different bonus dates Electronic communications APSS schemes for sister companies

5. 24 March 20095 APSS - Use of bonuses Original intention of legislation Use of bonuses generally –Funding of acquisition of shares - company –Basis of entitlement – participants Continue with general principle

6. 24 March 20096 APSS - Use of bonuses Fixed bonus –Contractual entitlement (written or implied) Tax Briefing Issue No 56 (July 2004) No change in Revenue’s position

7. 24 March 20097 APSS - Use of bonuses Discretionary bonuses Payment and amount at discretion of employer Performance criteria/performance appraisal schemes No change in practice

8. 24 March 20098 APSS - Use of bonuses Team Bonuses Revenue will now consider these –Not fixed –Team performance measures Business results Other objective tests

9. 24 March 20099 APSS - Use of bonuses Different teams –Equal opportunities –Measurement of achievement –Ratings applied Full particluars to Employee Share Scheme Section

10. 24 March 200910 APSS - Use of bonuses Sales and non-sales staff Different bonus structure Sales commission Similar terms rule paramount Portion of sales commission can be used Full particulars to Employee Share Scheme Section

11. 24 March 200911 APSS - Use of bonuses Example Discretionary bonus payable to non-sales staff under a performance appraisal scheme 0- 5% Sales Commission payable to sales staff under a performance appraisal scheme 0-20%

12. 24 March 200912 APSS - Use of bonuses Non-sales employee received 5% bonus Sales employee received 20% sales commission Lowest common percentage is 5% Maximum amount that can be invested in APSS is to be determined using the formula:

13. 24 March 200913 APSS - Use of bonuses Lowest maximum common denominator x Bonus % Maximum bonus % Non-sales employee can invest: 5 x 5 = 5% 5 Sales employee can invest: 5 x 20 = 5% 20

14. 24 March 200914 APSS - Use of bonuses Example Discretionary bonus payable to non-sales staff under a performance appraisal scheme 0- 5% Sales Commission payable to sales staff under a performance appraisal scheme 0-20% Non-sales employee received 5% bonus Sales employee received 10% sales commission

15. 24 March 200915 APSS - Use of bonuses Lowest common percentage is 5% Maximum amount that can be invested in APSS is to be determined using the formula: Lowest maximum common denominator x Bonus % Maximum bonus %

16. 24 March 200916 APSS - Use of bonuses Non-sales employee can invest: 5 x 5 = 5% 5 Sales employee can invest:5 x 10 = 2.5% 20

17. 24 March 200917 APSS - Use of bonuses Agreed payments Collective bargaining arrangements Cost savings, changes in work practices, transformation, staff reductions; increased productivity General position – no change Examine each case based on specific facts

18. 24 March 200918 APSS – Carry forward of contributions Salary Forgone –Similar terms at each appropriation date –Exceptional circumstances – different dates Carry forward within same tax year –Company funded shares appropriated first –Normal limits apply Maximum 7.5% of salary or company’s contribution 1:1 ratio

19. 24 March 200919 APSS – Carry forward of contributions Example A bonus of €1,000 is payable to an employee on 31 March 2009. The employee is forgoing salary of €100 per month. The employee opts to take shares in lieu of his/her bonus. The market value of the shares at 31 March 2009 is €2.00 per share. The market value of the shares at 31 December 2009 is €1.00 per share.

20. 24 March 200920 APSS – Carry forward of contributions 31 March 2009 Bonus – Shares appropriated to the value of €1,000 (500 shares with market value of €2.00 each). Salary Forgone Jan – March €300 – 150 shares appropriated (market value €300).

21. 24 March 200921 APSS – Carry forward of contributions 31 December 2009 Salary forgone April – December is €900. The maximum number of shares that can be appropriated is 350 (market value €350). The balance of the salary forgone €550 must be repaid to the employee after making appropriate PAYE/PRSI/Levies deductions.

22. 24 March 200922 APSS – Carry forward of contributions Contributory schemes (BOGOF) Aggregate contributions insufficient to purchase whole number of shares Carry forward within same tax year –Excess plus normal cannot > max allowable monthly contribution –Monthly contribution fixed at beginning of year –Participant’s agreement

23. 24 March 200923 APSS – Different bonus dates Different bonus dates – management and other staff Participant elects to take cash –Similar terms rules –At each appropriation date Change in Revenue practice –Employee opts not to participate in APSS –Contract of participation/Form of acceptance –Need not defer payment of cash

24. 24 March 200924 Review of Approved Profit Sharing Scheme Electronic communications No objection where no legal restrictions Consent from participant –Electronic Commerce Act 2000

25. 24 March 200925 Review of Approved Profit Sharing Scheme Group schemes Sister companies Administration of one scheme for sister companies No change in Revenue position

26. 24 March 200926 Summary Protection of fundamental principles Broadening of some practices –Sales commission –Team Bonuses –Different bonus dates – payment of cash –Carry forward of contributions Next issue of Tax Briefing – early April

27. 24 March 200927 Review of Approved Profit Sharing Scheme Thank You