The deadline for share schemes requires companies to act in April or May in order to meet the deadline and avoid penalties.
When an employer gives shares to an employee (including directors and families) or establishes a tax-advantaged share or share option scheme, the benefit is taxed through the Employment Related Securities (ERS) regime. The employer is obliged to register share schemes with HMRC and file an annual return.
- An online return is generally required for every individual registered employment-related securities scheme or arrangement.
- These are due by 6 July following the end of the tax year in which the shares were issued.
- A nil return is still required if there are no reportable events during the tax year.
- Before a company can submit a return using the Online Service, it must be registered to use HMRC’s Online Services. This can be accessed here.
- Penalties will apply for late returns. Penalties for error will also apply, in cases where the reporting error results in a loss of tax.
All UK companies are required to notify HMRC of a wide range of share and security transactions. These include shares, loan stock and debentures that are either held by an employee or a person that is connected to them.
It is important that timely action is taken to ensure that no late filing penalties are incurred.
Which companies need to act?
Generally, any share transaction involving an employee or director is required to be reported.
Who reports the transaction?
There have been changes to the online registration process and who can deal with parts of the registration process.
The initial registration of a company’s share plan must be undertaken by the company itself. This is through HMRC’s Employment Related Securities service. This forms part of HMRC’S existing online PAYE service. Once online registration is completed, an agent can enrol, to assist in the filling of these returns.
When do you need to act?
In short, a company should act now. Registration for these online services can take at least a week. Furthermore, is your tax advisor/accountant to register as your agent online to undertake the work on your behalf, this can take at least three weeks for approval.
All new ERS schemes must be registered with HMRC, including one-off awards or gifts of shares.
All new tax-advantaged schemes are required to be registered by 6 July, following the tax year in which it was established.
These schemes cannot be registered after 6 July:
- Company Share Option Plans (CSOP)
- Save as You Earn (SAYE)
- Share Incentive Plans (SIP)
Additionally, you need to register non-tax advantaged schemes if there is a reportable event. This can include acquiring or disposing of securities, or assigning or releasing securities options.
What type of transactions need to be reported by a company?
Whilst not exhaustive, some of the frequent types of transactions that need to be reported include:
- Assignment or release of (taxable) securities options
- A change in the rights of shares held by employees
- Rights issues or bonuses issued to employees
- Sales of shares and securities that are ‘restricted’
- The issue or transfer of shares and securities
- The grant or exercise of a share option or other rights to acquire shares
Late penalty fines
As HMRC no longer issues notices to file or reminders, it is important to ensure that returns are submitted.
A return is required for every individual share plan registered. This also applies, even if there is a nil return. Failing to file, or late filing could result in penalties.
Notifying HMRC of Enterprise Management Incentives (EMI) Share Options
An EMI scheme is a tax-advantaged share scheme that can be operated by qualifying independent trading companies (that have assets of £30 million or less). EMI share options can be granted to employees that are eligible.
HMRC needs to be told about a grant of an EMI share option. This is done by submitting an EMI notification, which must be submitted within 92 days of the date of the grant. Failure to do this may result in the loss of the scheme’s tax benefits.
Before this can be done, you need to tell HMRC about your EMI scheme. A reference number will be provided within 7 days of registering a scheme. With this, you can tell HMRC about the grant of an EMI option.
How can we help?
Deciding whether you need to report transactions is a complex matter, as is the accurate completion of the required forms.
Our specialist tax team can remove this burden from you and carry out all the work on your behalf. From the initial registration through to the completion of the annual returns. We can also advise on wider issues surrounding the tax efficiency of your business.