Budget 2023: Improvements to the Key Employee Engagement Programme

PUBLISHED: 28th September 2022

Improvements to the Key Employee Engagement Programme (KEEP) were announced in the Budget 2023 Statement. 

Such improvements form part of a range of support measures being introduced for Small to Medium Enterprises (SMEs) which are recognised as being the backbone of the Irish domestic economy.   

In short, KEEP is a tax advantageous share option incentive arrangement for start-ups and SMEs.   Subject to satisfying relevant conditions, no income tax, Universal Social Charge or PRSI arises on the exercise of a KEEP share option and instead capital gains tax arises on the subsequent disposal of the KEEP shares.  Such tax efficiency is significant as the employee can use the share sale proceeds to fund their tax liability.  

The Budget 2023 measures announced can be summarised as follows:

•       Increasing the current KEEP limit from €3million to €6million

•       Facilitating of the buy-back of KEEP shares from the relevant employee by the issuer company; and  

•       Extension of KEEP relief to 31 December 2025

Furthermore, changes to KEEP introduced in the Finance Act 2019 regarding group structures and qualifying employees are to be brought into effect.

To date, there has been a low take up under KEEP, due in part to the restrictive conditions which must be satisfied and which impact on KEEP’s effectiveness for SMEs. 

The improvements announced in Budget 2023 are a very welcome development and hopefully will encourage take up of KEEP by SMEs. 

The effectiveness or otherwise of the proposed improvements will only be capable of being assessed once further details are made available and we await developments in this regard.

If you are interested in obtaining more information on KEEP or other employee incentive arrangements please contact Gillian Dully at gdully@lkshields.ie.