Debenhams, the British retail company operating in Dublin, has introduced a savings-related share ownership scheme for its 300 employees and plans to launch a share option scheme in the new year.

Nearly a third of all Debenhams' British employees are shareholders in the company and this initial scheme involves employees putting away designated sums for a set period into a tax-free An Post Instalment Savings Scheme after which they can purchase Debenhams plc shares for £2.95 sterling, a 20 per cent discount on its current share price of about £3.85 sterling.

Debenhams has been committed to these schemes in Britain for some time, as has been Marks & Spencer, though similar share participation schemes are not available to Irish staff of M&S, said a company spokesman in Dublin.

The tax you pay on employee share schemes depends on what kind of scheme it is - in the Debenhams' case, staff may have to pay income tax on the difference in the value of the shares when they exercise their option to buy them at the reduced price and the actual market value. A profit sharing scheme, in which employees can receive shares - up to £10,000 worth - directly from the employer can result in an income tax liability if they are sold before three years of ownership.

You may also have to pay Capital Gains Tax if there is an increase in value of the share over and above the rate of inflation from the date you acquired them until the date you sold them. Fortunately, the CGT rate is only 20 per cent.

The Revenue Commissioners has just published a useful Guide to Profit Sharing Schemes aimed at tax practitioners and scheme trustees, complete with technical guidance notes and specimen guidance forms.