On 25 March 2011 Revenue issued an e-brief dealing with (i) the new grandfathering treatment for share based remuneration announced by the Minister for Finance, (ii) transitional arrangements for payment of tax and (iii) payment of USC on unapproved share options.

We have summarised the guidance in the e-brief below.

1. Grandfathering and Recovery of PRSI

Following on from the statement by the Minister for Finance concerning "grandfathering" of PRSI on share based remuneration (where there was a written agreement between employer and employee prior to 1 January 2011)*, Revenue have now confirmed any PRSI already deducted by employers which falls within the grandfathering arrangement may be recouped by adjustment to payroll in the current tax year (employers should avoid reducing pay to less than €38 in any PRSI week so that employee contribution records are not adversely affected).

2. Transitional Arrangements for PAYE

Revenue and the Department of Social Protection have recognised that employers need time to amend their processes to comply with new tax and payment procedures for share awards introduced from 1 January 2011. As a transitional arrangement no interest or penalties will be imposed where any outstanding liabilities are settled before the P30 filing date for June i.e. 14 July 2011 or 23 July for ROS (on-line) filers. This transitional arrangement will apply to income tax, USC and PRSI on share awards, to USC and PRSI on the exercise of SAYE options and appropriations of shares in approved profit sharing schemes and to PRSI on the exercise of non-SAYE options.

Interest on late payment will be calculated from the actual due dates and not from the extended deadline, where liabilities are not settled by the extended deadline.

3. USC and RTSO

Revenue have confirmed their view that USC on exercise of unapproved share options should be paid with income tax within 30 days of exercise using the RTSO procedure. Payment of tax and filing the RTSO1 is the employee's responsibility. USC payable on gains made since 1 January 2011 should now be paid under this procedure if payment has not already been made.

4. Further Briefings

Revenue have confirmed a further e-brief relating to other aspects of tax and PRSI on share based remuneration will issue shortly.