For the tax year ended 5 April 2017, if you operate an employee share plan in the UK, then you need to do the following by no later than 6 July 2017:
Register any new share plans with HMRC.
File your 2016/17 annual share plan return with HMRC.
Self-certify any new tax advantaged share plans (CSOP, SAYE and SIP) with HMRC.
Companies must do this using the HMRC Employment Related Securities online service which can be accessed through their PAYE online portal. All companies, UK or otherwise, that trigger a reportable event will need to register their plans and file their returns through the online portal.
Failure to comply will result in automatic penalties for each plan registered and, for UK tax advantaged plans, the loss of the associated tax advantages.
New share plans
If you have established a new share plan during the tax year ended 5 April 2017, that plan will need to be registered online with HMRC before the annual share plan return (see below) can be submitted. The new share plan registration process can take up to a week to complete, so any new plans should be registered as soon as possible to allow plenty of time for the annual return to be submitted by the 6 July 2017 deadline.
There is no way to correct errors made in relation to the name or the type of plan when the plan is registered with HMRC. If an error occurs, the plan must be notified as ceasing and then re-registered with the correct name or plan type. Failure to notify HMRC that the plan is no longer being used can result in penalties for late filed annual returns.
Finally, if you have made additional share option grants or awards under a plan that has previously been notified to HMRC, there is no need to re-register that plan.
Annual share plan return
HMRC have provided templates for uploading data on awards of share options and shares. The template forms and guidance on how to complete the forms can be found here. It is important that you use the correct version.
As a reminder, for share plan activity during the tax year ended 5 April 2017, you may need to report:
- Any grants of share options or share awards made.
- The exercise of any options or the acquisition of any shares or securities (including loan notes).
- Cash cancellation payments in respect of any share awards.
- Certain disposals of shares or securities (which have triggered an income tax charge).
- Certain other events in relation to shares or securities (known as reportable events).
- Certain events under UK tax advantaged plans.
If a company registered a plan last July but there has been no activity during the tax year ended 5 April 2017, you must nevertheless file a nil return. Failure to do so will result in a non-filing penalty.
If, during the tax year ended April 2017, a company operated a new CSOP, SAYE or SIP, it must notify HMRC of the existence of the new plan by 6 July 2017. The notification includes a declaration that the requirements of the relevant legislation have been met.
Note that for EMI purposes it is the grant of the options that must be notified to HMRC and this must be done within 92 days from the date of grant. The notification must be made online.
Penalties for late or incorrect filing of annual returns start automatically on 7 July 2017 at a rate of 100, with an incremental increase of 300 being charged three months after the filing date and then again at six months if the return has still not been submitted. An additional daily fine of 10 will be levied after nine months until the return is submitted.
HMRC also punishes errors in the plan documentation. If an annual share plan return contains a material inaccuracy that is careless or deliberate or simply not correct, HMRC could levy fines of up to 5,000.
And now for something completely different
Did you know that HMRC have updated their policy and practice in relation to tax advantaged EMI share options?
In order to be a qualifying EMI option, the EMI option agreement must contain details of any restrictions attaching to the option shares, e.g. restrictions on leavers.
Previously it was possible to detail these restrictions simply by referencing their existence in the relevant document in which they were contained such as the company's articles of association. However, HMRC now require any restrictions to be specifically identified in the EMI option agreement itself, i.e. it is no longer sufficient to simply incorporate the restrictions by reference to another document. From now on, in order to comply with HMRC practice, the practical approach for granting EMI options is to ensure that a summary of the relevant restrictions has been drafted and enclosed with the option agreement.