HM Revenue & Customs is introducing new registration and self-certification requirements for both new and existing share plans effective from 6 April 2014. This is following the recommendations of the Office of Tax Simplification.

All new and existing employee share plans and arrangements will need to be registered online. Companies will also need to certify that any tax advantaged plans meet certain requirements.

The following need to be registered:

  • unexercised EMI options
  • new grants of EMI options
  • non-tax advantaged arrangements currently recorded on Form 42
  • Company Share Option Plans ("CSOPs")
  • Save As You Earn plans ("SAYE plans")
  • Share Incentive Plans ("SIPs")

In place of the current formal HMRC approval process for approved plans (CSOPs, SAYE plans and SIPs), companies will be required to register new plans online and self-certify online that their plan meets the legislative requirements.

Companies will also need to make an online annual declaration that the requirements of the applicable CSOP, SAYE or SIP legislation are being met. This is whether the plan was established before or after self-certification was introduced.  HMRC will be able to enquire into plans and penalties can be imposed if it is found that the plan is not in line with the legislation. 

Registration and self-certification under the new regime needs to be completed by 6 July 2015, or tax advantages will be lost. Companies will be able to register from 6 April 2014.

How to register

Registration and self-certification will be part of the "PAYE online for employers" service where many employers are already registered for PAYE on payroll.

Share plan annual returns

Currently, companies are required to file share plan annual returns with HMRC on paper. The deadline for the filing of Form 42 (for unapproved plans) and EMI 40 (for EMI plans) is by 6 July after the end of the relevant tax year. The links for the tax year ended 5 April 2014 are as follows:

Companies should proceed as normal for the current tax year by completing a paper return and sending a hard copy to HMRC.

This will be the last year in which share plan returns will be filed on paper, as from 6 April 2015 these annual returns will instead need to be filed online.  There will also be automatic penalties for late filing.

EMI option grant notifications – 92 days limit

Currently, the grant of an EMI option must be notified to HMRC by filing a completed and signed EMI 1 form with HMRC within 92 days of the date of grant. All EMI options granted before 6 April 2014 must be notified using a paper EMI 1 form, even if notified after 6 April 2014.

For all grants made on or after 6 April 2014, the employer will instead need to make an online declaration to HMRC within 92 days of the date of grant rather than send a paper form. This will include confirmation that the EMI option holders have made written declarations that they meet the "working time requirement". Copies of the employees' signed declarations must be retained by the employer and HMRC may require that the declarations be produced to them.

Details from HMRC of the exact form of the new declaration and procedures for online filing have yet to be provided, but action may be required sooner rather than later when EMI options are being granted or have been granted and not yet reported.

Other share plan changes

  • Limits have been increased in relation to SIPs and SAYE plans.
  • Other minor changes have been made to the legislation for CSOPs, SIPs and SAYE plans.
  • Employees must reimburse an employer within 90 days of the end of the tax year rather than 90 days of the taxable event to avoid a "tax on tax" charge within section 222 Income Tax (Earnings and Pensions) Act 2003.
  • From 6 April 2015, there will be important changes on the taxation of internationally mobile employees in relation to share options. In particular, a proportion of the gains on share options granted before an employee becomes UK resident will become taxable in the UK.

Action points

Online registration should take place as soon as is practicable for EMI options. For other plans registration can take place during the course of the next tax year. All plans should be reviewed to ensure that they comply with the changes to the legislation.