Plans by dozens of companies to set up share option schemes for employees have fallen foul of the Revenue Commissioners, it has emerged.

The Minister for Finance, Mr McCreevy, introduced changes in the 2001 Budget to encourage companies to use share options to "recruit and reward" highly skilled, mobile staff.

However, just two of the 50 applications submitted since the measure came into force last April have actually met the standards laid down by the Minister.

Under the rules, 70 per cent of the options must be available to all staff on similar terms, while the remaining 30 per cent can be targeted towards key employees.

The majority of applications have failed because the Revenue insists companies have not split the scheme fairly, sources yesterday told The Irish Times.

The new scheme offers significant advantages because any gain in the shares' value will attract capital gains tax, rather than become partly liable to income tax.

The 70/30 share split demanded by the Minister for Finance is deeply unpopular with companies, which have argued for change since its introduction in April.