Employment-Related Shares in Ireland: The Definitive 2025–2026 Guide for Startups and SMEs

employment related shares Ireland 2026

Published: January 2026
Author: Amergin Consulting Ltd.
Target Audience: Business Owners, Finance Managers, and Small Business Seeking Financial Stability
Book a meeting: https://calendly.com/amergin-group_free/30min-finance-consultation


How equity, share schemes and reporting obligations can either power your growth or quietly undermine it if handled incorrectly.

For many Irish startups and growth-stage SMEs, equity is no longer an abstract idea reserved for Silicon Valley or listed multinationals. It has become a practical, everyday tool. Founders use shares to bring in early talent when cash is tight. Scaling businesses use equity to retain senior leaders. Growing companies design share structures to align long-term incentives, prepare for investment, or plan for eventual exit.

But alongside that opportunity sits one of the most complex and tightly monitored areas of Irish tax compliance: Employment-Related Shares (ERS).

In recent years, Revenue has dramatically increased scrutiny of share-based remuneration. Mandatory electronic reporting, automatic penalties, cross-checking with payroll and corporation tax returns, and enhanced data matching have turned ERS from a “later problem” into a front-and-centre compliance risk.

In 2025–2026, no Irish business that issues shares to employees or directors can afford to misunderstand ERS.

This guide explains what employment-related shares are, how they are taxed, what must be reported, why startups are particularly exposed, and how businesses can use equity strategically and safely  with the right structure and advice.

What Are Employment-Related Shares (ERS)?

Employment-Related Shares are shares or securities acquired by an individual because of their employment or directorship. The definition is intentionally broad. Revenue looks not at the label applied to the shares, but at the reason the opportunity arose.

If the right to acquire shares exists because someone is an employee, director, or office holder the arrangement falls within ERS.

This includes situations where:

  • a founder receives shares on incorporation

  • a director acquires shares at a discount

  • an employee receives shares instead of salary

  • share options are granted or exercised

  • restricted shares vest over time

  • growth shares are issued to senior staff

  • equity is used as a retention or incentive mechanism

The key question Revenue asks is simple:
“Would this person have been offered these shares if they were not employed or holding office?”

If the answer is no, ERS rules apply.

Why Employment-Related Shares Matter More Than Ever

The increased focus on ERS is not accidental. Three major shifts have converged:

First, equity usage has exploded among Irish startups and SMEs. More companies are issuing shares earlier, often before they have formal HR, payroll or governance structures in place.

Second, Revenue has modernised its compliance systems. Like PAYE modernisation, ERS reporting is now fully digital, time-bound and penalty-driven. Revenue can match ERS data against payroll, Form CT1, Form 11, CGT filings and even company valuation changes.

Third, historic under-reporting was widespread. For years, share issues went unreported because businesses believed that “no tax due” meant “no reporting required.” That era is over.

In 2025–2026, Revenue treats ERS as a high-risk compliance area, particularly for startups.

The Different Types of Employment-Related Shares

ERS is not a single structure. It is an umbrella term covering many forms of equity and share-based incentives. Understanding the differences is critical, because tax treatment and reporting obligations vary.

1. Ordinary Shares Issued to Employees or Directors

These are the most basic form of equity. They often appear at incorporation or early funding stages, where founders or early employees acquire shares at nominal value.

The danger here is valuation. Even early-stage companies have a market value. If shares are issued at less than market value, the discount may be taxable as income.

Many founders assume that “€1 shares” carry no tax risk. That assumption is often wrong.

2. Share Options

Share options give the right but not the obligation to acquire shares at a fixed price in the future.

Most Irish SMEs use unapproved share options, which are flexible but carry significant tax implications. Tax often arises on exercise, based on the difference between exercise price and market value at that time.

Crucially, tax may be due even if the shares cannot be sold.

Approved schemes exist (such as KEEP), but they have strict qualifying conditions and are not suitable for every business.

3. Restricted Shares

Restricted shares are subject to conditions such as forfeiture if the employee leaves within a certain period.

Revenue allows a reduction in taxable value for genuine restrictions. However, the restrictions must be real, enforceable and documented. Artificial or poorly drafted restrictions may be ignored.

Restricted shares still fall within ERS and must still be reported.

4. Growth Shares

Growth shares are increasingly popular with Irish SMEs and PE-backed businesses. They entitle the holder only to future growth above a set threshold.

When structured correctly, growth shares can significantly reduce upfront tax exposure. When structured poorly, they can trigger unexpected income tax charges.

Valuation and documentation are critical here.

5. RSUs and Equity-Linked Awards

More common in larger or multinational environments, RSUs (Restricted Stock Units) and similar awards are also employment-related shares.

They are heavily regulated and almost always taxable at vesting.

Taxation of Employment-Related Shares

ERS can trigger multiple layers of tax, often at different times.

Income Tax

If shares are acquired at less than market value, the discount is treated as employment income. This applies whether the individual is an employee or director.

Income tax can arise:

  • when shares are acquired

  • when restrictions lift

  • when options are exercised

USC and PRSI

In many cases, USC and PRSI also apply to the taxable benefit. This significantly increases the effective tax rate.

For founders and senior executives, this can come as a shock.

Capital Gains Tax (CGT)

When shares are eventually sold, CGT applies to gains. This is separate from employment taxes and requires careful planning.

Failing to track base cost correctly can lead to overpayment or disputes.

The Most Dangerous ERS Risk: Tax Without Cash

One of the biggest practical risks of ERS is dry tax charges tax arising without any cash to pay it.

Common scenarios include:

  • exercising options in a private company

  • restricted shares vesting before liquidity

  • growth shares triggering income tax

  • founders acquiring shares early but later re-valued

Employees often assume tax only applies when shares are sold. That assumption is frequently incorrect.

This is where professional advice becomes essential.

ERS Reporting: Where Most Businesses Get It Wrong

Perhaps the most misunderstood part of ERS is the reporting obligation.

Any employer who has:

  • issued employment-related shares

  • granted or exercised share options

  • varied share rights

  • released restrictions

  • allowed vesting events

must file an ERS return electronically via ROS.

Key facts businesses regularly miss

  • Reporting is mandatory even if no tax is due

  • Reporting is mandatory even if the employee pays the tax personally

  • Reporting is mandatory even if shares were issued at market value

  • Reporting is required every year a reportable event occurs

  • The deadline is 31 March following the tax year

Failure to file results in an automatic €3,000 penalty per return, with additional penalties for continued non-compliance.

For startups that issue shares to multiple employees over several years, penalties can escalate quickly.

Why Revenue Focuses So Heavily on ERS

From Revenue’s perspective, ERS represents a perfect storm:

  • subjective valuations

  • delayed liquidity

  • complex structures

  • historic under-reporting

  • high-value outcomes

Revenue now cross-checks:

  • ERS filings against payroll submissions

  • director shareholdings against CT1 returns

  • share valuations against funding rounds

  • CGT filings against historic ERS events

ERS is no longer an isolated compliance area. It is fully integrated into Revenue’s data ecosystem.

ERS and Startups: Why Early-Stage Companies Are Most Exposed

Startups face unique ERS risks:

  • shares are often issued informally

  • valuation is underestimated

  • reporting is overlooked

  • payroll and equity are disconnected

  • funding rounds change everything retrospectively

A common scenario we see at Amergin:

“We issued shares cheaply to founders and early employees. Two years later, during a funding round, Revenue queries why ERS returns were never filed — and penalties follow.”

These issues often surface during:

  • due diligence

  • investment rounds

  • acquisitions

  • Revenue audits

Fixing them later is possible  but expensive.

How ERS Affects Employees and Directors

ERS obligations do not sit solely with the employer.

Employees and directors may face:

  • unexpected personal tax bills

  • complex Form 11 filings

  • CGT planning challenges

  • timing issues around liquidity

Clear communication matters. Employees must understand:

  • when tax may arise

  • how it will be paid

  • what reporting occurs

  • what records they need

When this is not handled properly, ERS can damage trust rather than build loyalty.

How Amergin Consulting Supports ERS Strategically

At Amergin Consulting Ltd., we work with Irish startups and SMEs across the full ERS lifecycle  from first share issue to exit.

Structuring Equity Correctly

We help clients choose the right structure:

  • ordinary shares vs growth shares

  • restricted vs unrestricted

  • options vs direct issues

This minimises tax risk while preserving commercial intent.

Valuation and Risk Review

We assess:

  • whether shares are issued at market value

  • whether restrictions are valid

  • potential income tax exposure

This avoids unpleasant surprises later.

ERS Reporting and Compliance

We:

  • prepare and file ERS returns via ROS

  • track reportable events

  • manage deadlines

  • eliminate penalty exposure

Integration with Payroll and Tax

ERS does not exist in isolation. We ensure:

  • payroll treatment aligns with ERS

  • Form CT1 and Form 11 filings reflect equity correctly

  • CGT base costs are accurate

  • records are audit-ready

Employee and Founder Advisory

We advise individuals on:

  • timing of exercises

  • personal tax exposure

  • CGT planning

  • exit scenarios

This protects both the business and the people behind it.

Investment and Exit Readiness

ERS issues often derail deals. We clean up:

  • historic reporting gaps

  • undocumented share issues

  • valuation inconsistencies

This protects deal timelines and company value.

Common ERS Mistakes We See (and Fix)

  • assuming “no tax means no reporting”

  • issuing shares without valuation

  • missing ERS filing deadlines

  • misusing restricted share relief

  • exercising options without tax planning

  • separating payroll and equity compliance

  • founders unaware of personal liabilities

Each of these is fixable — but prevention is far cheaper.

Conclusion: ERS Is a Strategic Tool If You Treat It Properly

Employment-Related Shares can be one of the most powerful tools available to Irish startups and SMEs. They allow businesses to attract talent, conserve cash, align incentives and plan for long-term success.

But ERS also sits at the intersection of:

  • employment tax

  • income tax

  • capital gains tax

  • reporting compliance

  • valuation

  • governance

In 2025–2026, Revenue expects ERS to be treated with the same seriousness as payroll or VAT.

With the right advice, systems and reporting, ERS becomes a strength not a liability.

At Amergin Consulting Ltd., we help businesses use equity confidently, compliantly and strategically so growth is supported, not undermined.

About Amergin Consulting Ltd.

Amergin Consulting Ltd. is a Dublin-based chartered accountancy and business advisory firm serving Ireland’s SMEs and growth companies across construction, technology, professional services, and renewable energy.
We specialise in Accounting, Payroll, Taxation, and CFO Services that help businesses build stronger foundations for profit and compliance.

Need help running a year-end tax review or planning your 2026 payroll changes?
Amergin Consulting’s finance and tax team can help you identify deductions, forecast cash flow, and ensure full compliance before the year closes.
Book your 30-minute consultation: https://calendly.com/amergin-group_free/30min-finance-consultation

Disclaimer

This article is for general informational purposes only and does not constitute financial or tax advice. While every effort has been made to ensure accuracy, Budget 2026 legislation may change upon enactment of the Finance Act 2025.
Public should seek professional advice tailored to their specific circumstances before acting on any points discussed.

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