Fears Irish employee share ownership sector could be hit post-Brexit

The Irish ProShare Association has warned that the employee share ownership sector in Ireland is facing crisis because of Government inaction to address the threat posed by Brexit.

More than 12,000 Irish employees may be hit by increased tax bills and loss of benefits because their Revenue-approved Save As You Earn (SAYE) scheme savings accounts are held in the UK-licensed banks Barclays and Yorkshire Building Society (YBS). However, this banking service will have to end if the UK crashes out of the EU with no Brexit deal to continue European Union financial passporting.

The accounts – with a combined value of around €12 million – will either have to be dissolved or [if permitted] transferred to the only Irish-licensed bank offering these services, Ulster Bank. In both scenarios, affected employees will be hit by loss of benefits and negative tax consequences while Ulster Bank will have a monopoly on the market for the 22,000 Irish employees with SAYE schemes.

For example, a worker with a share option profit of €1,000 from their SAYE account held in a UK institution would expect to pay tax of up to €120 but will instead face a tax bill of up to €520 if EU passporting ends for UK banks without new regulations being put in place.

IPSA is a voluntary representative body which advocates for increased employee ownership and employee financial involvement.

IPSA CEO Gill Brennan said: “Brexit is just over five months away and if nothing is done then 12,000 Irish employees are going to be facing big tax bills on money they have saved under a Revenue approved Scheme”.

“This isn’t going to cost people at the very top, it’s going to hit those in the middle – regular employees who use these SAYE share schemes to save towards things such as home deposits, home improvements, cars, holidays and weddings.

“These people are in a Revenue-approved scheme, yet the Government has failed to legislate so they can use these savings without being hit by big tax bills they were never meant to face. Meanwhile, no Irish banks have entered the market to provide a service in competition with Ulster Bank.

“Minister for Finance Paschal Donohoe could end the uncertainty over this issue simply by issuing a ministerial order to approve other banks in Ireland as carriers for SAYE purposes. The Government has a moral obligation to ensure the continuation of the conditions of the SAYE scheme that these employees signed up to.”

Of all approved employee share plans currently in operation in Ireland, 18% of those are SAYE plans. Under this scheme, a company grants options over shares to its employees at a discount of up to 25% on the listed price.

Employees save from their after tax pay up to €500 each month for usually three or five years with the Bank. On maturation of the plan, the employee can exercise their share options and the gain is not subject to income tax however the employee pays USC and PRSI. If they sell their shares they may have further tax (capital gains tax) to pay.