Shares for employees

Restricted shares

A restricted share scheme is a tax efficient way to award shares to your employees. Restricted share schemes are also sometimes referred to as 'clog schemes'. You do not require Revenue approval to operate a restricted share scheme.

Restricted shares are shares acquired by your employees where there is a restriction on the disposal of those shares. This include shares acquired on the exercise of a share option.

You must establish a trust for the benefit of your employee. Alternatively, you may use another arrangement similar to a trust, which must be approved by Revenue.

The shares must be held in the trust (or other arrangement) for a specified period of at least one year. During this period your employee is restricted from:

  • assigning the shares
  • transferring the shares
  • pledging the shares as security for a loan
  • selling the shares.

The terms of the restriction must be set out in a written agreement with the employee.

Disposal of shares

The shares cannot be disposed of other than in very limited circumstances. For example, on the employee’s death or in certain company reorganisations.


Normally the amount chargeable to tax is the difference between:

  • the market value of the shares at the date of acquisition
  • and
  • the price (if any) paid by the employee.

To take account of the restriction placed on the employee or director from disposing of the shares, the amount chargeable to tax is reduced. The reduction is between 10% and 60% depending on the period of restriction.

Amount of reduction

Number of years of restriction

Amount of reduction











More than 5 years


The restriction may be changed or lifted before the end of the agreed restriction period. If this happens then you must recalculate the tax liability. The adjustment must take account of the actual period the restriction is in place. With effect from February 2022, you will be required to account for the additional tax due by your employee.

Reporting requirements

You must report details of the restricted shares acquired on the Form ESA.

For more information please see Share reporting obligations.

Next: Employee Share Purchase Plans and cash-settled share-based awards