Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 5:

In page 11, to delete lines 16 to 21 and substitute the following: “company, and

(b) whose business consists wholly or mainly of the holding of shares only in the following (and no other companies), namely, its qualifying subsidiary or subsidiaries and where it has a relevant subsidiary or subsidiaries, in that subsidiary or in each of them;”,”.

The amendments concern the proposed changes to the key employee engagement programme, KEEP. I will speak initially to amendments Nos. 5 and 6, which are linked. The intention of the provisions in the Finance Bill is to open the scheme to group structures, whereby an individual employee could work in various companies within the group structure. The definition of a qualifying holding company, however, stipulates that the holding company must not carry on a trade or trades, which is the issue I seek to tease out, given that the provision does not reflect the commercial reality that in many cases holding companies do carry on trades. It could happen, for example, that an SME group grows organically, and the company carries on a trade and sets up a subsidiary to do so in Britain or Northern Ireland to expand its business into new lines of activity. Why should this disqualify the holding company and the wider group from relief under the KEEP scheme if the group's activities are eligible within the framework of the relief? What would be the unintended consequences if the restriction was removed from the definition? For example, would there be a cost to the Exchequer?

I turn to amendments Nos. 7 to 9, inclusive. The Bill as initiated disqualifies a company from the relief where it fails to submit the prescribed report with details on KEEP options and shares allotted, for example, by 31 March in the year following the relevant chargeable period. It seems unduly harsh that a company and its employees could be automatically disqualified from the relief in circumstances where, for example, a filing is made a day or two late. KEEP is a more complex scheme than most and, if we are to encourage SMEs to use the scheme, the penalty should be proportionate. Accordingly, I propose that "may" will be substituted for "shall". It is especially relevant when considering the cohort of companies, such as SMEs, that is intended to be within the scope of the measures. Replacing "shall" with "may" will give Revenue the ability to disqualify the company or group for consistent non-compliance, a power it should have. The obligations for reporting placed on a company operating KEEP are more onerous than the obligations on those operating an approved profit-sharing scheme or a save-as-you-earn scheme. The adjustment, if amendment No. 9 is accepted, will be proportionate.

On page 11, lines 18 to 21, inclusive, a new test is established for a qualifying holding company, namely, as a company "whose business consists wholly or mainly of the holding of shares only in the following (and no other companies), namely, its qualifying subsidiary or subsidiaries and where it has a relevant subsidiary or subsidiaries, in that subsidiary or in each of them". There is confusion over the precise meaning of the test and how it will work in practice. We have proposed the amendments to require the Minister or the Revenue to come forward with guidance on the provision. The KEEP scheme is complex enough, and the background is that just 87 employees have been in a position to avail of it until now. We should avoid, therefore, any steps that would further complicate it.

Amendment No. 9 is redundant, given that the other amendments have not been ruled out of order. It was tabled in case amendments Nos. 5 to 8, inclusive, were ruled out of order but they have not been.