Transcript Review of Approved Profit Sharing Scheme

Review of Approved Profit
Sharing Scheme
Kathleen Corley
Revenue Commissioners
24 March 2009
1
Review of Approved Profit
Sharing Scheme
• Legislation introduced in 1982
• Key principles
– all employee
– similar terms
• Revenue concerns
• Review of administrative practices
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Review of Approved Profit
Sharing Scheme
• IPSA submission
• Use of bonuses
–
–
–
–
Fixed
Discretionary
Sales commission
Team bonuses
• Certain other agreed payments
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Review of Approved Profit
Sharing Scheme
• Carry forward of contributions
– Salary forgone
– Contributory schemes
• Different bonus dates
• Electronic communications
• APSS schemes for sister companies
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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
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APSS - Use of bonuses
• Fixed bonus
– Contractual entitlement (written or implied)
• Tax Briefing Issue No 56 (July 2004)
• No change in Revenue’s position
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APSS - Use of bonuses
• Discretionary bonuses
• Payment and amount at discretion of
employer
• Performance criteria/performance appraisal
schemes
• No change in practice
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APSS - Use of bonuses
• Team Bonuses
• Revenue will now consider these
– Not fixed
– Team performance measures
• Business results
• Other objective tests
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APSS - Use of bonuses
• Different teams
– Equal opportunities
– Measurement of achievement
– Ratings applied
• Full particluars to Employee Share Scheme
Section
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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
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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%
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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:
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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:
24 March 2009
5 x 20 = 5%
20
13
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
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14
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 %
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APSS - Use of bonuses
• Non-sales employee can invest:
5 x 5 = 5%
5
• Sales employee can invest:
5 x 10 = 2.5%
20
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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
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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
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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.
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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).
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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.
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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
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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
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Review of Approved Profit
Sharing Scheme
• Electronic communications
• No objection where no legal restrictions
• Consent from participant
– Electronic Commerce Act 2000
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Review of Approved Profit
Sharing Scheme
• Group schemes
• Sister companies
• Administration of one scheme for sister
companies
• No change in Revenue position
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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
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26
Review of Approved Profit
Sharing Scheme
Thank You
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