HMRC has released further details of how it is proposing to implement the compulsory online “self-certification” of HMRC approved employee share plans and submission of all share scheme returns to HMRC. This will start taking effect in April 2014, although most companies will not be affected until July 2015. It is currently intended that all relevant actions will be taken through the HMRC PAYE online service. Accordingly, appropriate registration and preparation will be needed in good time to make the necessary submissions.
Stage 1: Registration
- By July 2015 at the latest, but earlier if companies are granting EMI options, companies operating employee share arrangements (both approved and unapproved) need to register online that they do so by using the HMRC PAYE online service.
- This should be no more than a simple one-off provision of basic information and it is not yet clear how unapproved plans will be registered as they in many cases do not have unique numbers as do approved plans. Companies still need to register even if their employees hold shares other than under formal share plans.
- In practice, due to the fact that it may take up to several weeks for the online registration to be set up, companies will need to register some time in advance of the share schemes return filing deadline of 6 July 2015 (see below).
Stage 2: Self-certification
- This is only relevant if a company sets up a new approved plan after the date that the new regime comes into place which ends “approval” (where HMRC read all relevant documentation and confirm that the plan has met the relevant statutory conditions and favourable tax treatment therefore applies) in favour of “self-certification” (where the burden shifts to companies to certify that conditions are met). This is expected to take place in summer 2014. A new plan will not need to be registered or certified, however, before awards are made. Companies which adopt a new SIP, SAYE or CSOP after this date will need to register the plan and self-certify by no later than 6th July following the end of the tax year in which the first grant or award is made under the relevant plan. So if a company adopts a new plan in September 2014, it would have to self-certify the plan by July 2015.
Stage 3: Online submission of share scheme returns information
- All annual returns (for approved plans, EMI arrangements and other arrangements currently reported on Form 42) will need to be submitted online from July 2015. The first compulsory online submission for annual returns (both approved and unapproved) will therefore be for the 2014/15 tax year. However, compulsory online in-year submission of the EMI1 form (which currently has to be submitted within 92 days of the grant of an EMI option failing which the option is not able to qualify for tax benefits) is likely to take effect much sooner - from summer 2014 - although it will be voluntarily available from April 2014.
- Any amendment to SIP, SAYE and CSOP scheme rules will need to be notified to HMRC as part of the annual online submission of share scheme returns – in effect “re-self-certifying” each year.
This project draws together three strands on which HMRC is simultaneously working.
First, HMRC is trying to eliminate what it calls “grey areas” where it accepts that companies will need to have much greater certainty in order confidently to be able to operate approved plans and certify that they are compliant without HMRC scrutinising rules and other documentation. Many issues are yet to be resolved here though, although HMRC has made progress in codifying an issues list.
Secondly, HMRC is taking the opportunity to simplify the returns, stripping out unnecessary information and also making the online forms “intelligent” so that when completing the forms companies will only be asked to fill out information which is relevant. HMRC is exploring whether companies can just attach Excel spreadsheets and how different people can complete the forms and at different times of the year so as to deal with the fact that in large and small companies, some information is supplied in-house and some externally (sometimes by different administrators). HMRC is visiting companies and payroll advisers to learn more about the difficulties companies have in completing these forms efficiently. There is also concern about how the online submissions and filings will operate in practice, including in the case of group companies where schemes may be operated at a subsidiary company level but for administrative ease reporting and filings are undertaken at a parent company level and in circumstances where those who deal with payroll are not the people who currently deal with the annual share schemes returns.
Finally, HMRC wants to receive information online so that it can target compliance more effectively. For example, it will better be able to cross-check companies’ returns with individual self-assessment returns. However, online filing in this area has had a chequered history.
At this stage, there is little companies need to do. However, if you have any concerns about implementation or want to contribute to the debate, please get in touch and we will relay those concerns to HMRC through the HMRC fora we engage in.
A copy of the relevant HMRC bulletin is available here