Q&A: Dominic Coyle answers readers’ queries

My father has Aer Lingus shares having worked there for 25+ years. He retired in the early 1990s.

He has chosen not to accept any offer so far. His buddies are receiving cheques all around him and he’s wondering when he too can expect payout. Do you know what he needs to do? Can he opt to sell now? What price will he get? If not, could you suggest a reliable point of contact we could use?

Ms BC, email

You say he has chosen not to accept any offer so far. The first thing to note is that this is no longer his choice. Regardless of his position, Aer Lingus has been sold to IAG – the owner of British Airways and Spanish flag carrier Iberia – and it has exercised its right to buy out any remaining shareholders, including your father.

The shares he holds are now worthless, except to trade in for his payment as a result of the takeover, so there is no point in holding out. There is no other offer coming, higher or otherwise, and aside from cashing in his shares, the only purpose of his certificates now is as wallpaper.

Your father needs to contact Capita Registrars, either by email on enquiries@capitaregistrars.ie or by phone on 01-5530050 to organise the return of any share certificates he holds and receive payment for his shares.

IAG paid €2.50 a share for Aer Lingus and a 5 cent per share dividend paid, which may have already been paid into his account, or by cheque.

I am told he could also simply send in his share certificates accompanied by a letter stating simply “I accept the offer”, but I strongly suggest you contact Capita first.

In any case, do not post in any certificate without first having photocopied it, and send it my registered mail. If it gets lost, replacing it is a costly business. If you live close to Dublin, you could always hand deliver the certificates to Capita’s offices in Grand Canal Square, but you would still want to get someone there to sign a receipt to confirm they have got the documents.

Given the number of shares your father holds, once he receives his payment there will certainly be tax issues for him.

Essentially, the sale of the shares crystallises a capital gain, presuming the €2.50 a share price is higher than the price he paid for the shares – as is likely. You are entitled to make a gain of €1,270 in any tax year without paying capital gains tax but on anything above that level, tax is levied at 33 per cent.

You say your father worked with the airline for 25 years, so I am assuming most of his shares will have come through various employee share schemes. Each of these has a different “acquisition price”, so you and he will need to work through the origin of the various elements of his holding.

If he bought his shares though the Approved Profit Sharing Scheme, also known as the "Cahill Plan", between 1996-1999, the "purchase price" has been deemed to be €1.27 a share.

To further complicate things, back then indexation was in place to adjust asset purchase prices for the effect of inflation. It was abolished from 2003 by then finance minister Charlie McCreevy. Depending on which tax year the shares were acquired in, a different indexation factor applies.

For the Cahill Plan shares, this has the effect of "increasing" the purchase price of the shares to €1.62 for shares acquired in the 1995/96 tax years (back then the tax year went from April to March) to €1.52 for shares bought in 1999/2000 under the plan.

In brief, it means the gain per share bought in 1995/96 is 88 cent, for 1996/97 it’s 91c; for 1997/98 it’s 94c, for 1998/99 it’s 96c, and for 1999/2000 it’s 98c.

Separately, other Approved Profit Sharing Scheme shares were acquired when the company floated on October 2nd, 2006, using what is called the Lump Sum Entitlement. The price for these shares was €2.10, so each of these particular shares has a capital gain of 40 cent.

In addition, shares were allocated to staff under the Aer Lingus Employee Share Ownership Trust (Esot) programme, which was established in 2003. Although shares were notionally allocated to staff between 2003-2006, they were not owned by staff members until December 2010, when the "appropriation" price was €1.15. On these shares, the gain is €1.35 a share.

Finally, staff secured shares through a series of “auctions” between 1997-2005. On these, your father will need to check his records to see what price he paid for them at the time.

Again, on shares bought before the end of 2002 through these auctions, you can use the CGT indexation multiplier which you can find at revenue.ie/en/tax/cgt/leaflets/cgtmult.pdf in the Capital Gains Tax section under leaflets. Essentially, you go down Column 1 to find the year of purchase and then multiply the purchase price by the figure in the final column on the right-hand side.

To top all this, your father may have acquired shares in the market as an ordinary investor at the time of flotation or subsequently. For these, he will need to check his paperwork to see what he paid in order to assess any capital gain.

As you can see, it has the potential to be a serious headache. Since your father retired in the 1990s, several of the schemes above may not apply but, if in doubt – and given the number of shares your father holds – it might be an idea to enlist the help of an accountant.

You should also bear in mind that your father is required to pay any capital gains tax due by December 15th, assuming he receives his payment from Capita/IAG/Aer Lingus by the end of November. If he gets his money in December, the payment date is January 31st next. The tax deadline for any payment received in early 2016 will be December 15th next year.

On payments made this year, a tax return is required by October 31st next year, a date that pushes out a year for CGT payments made in 2016.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.