You need to do the following by 6 July 2018:
- complete end of year reporting for share plans and arrangements
- register all new share plans and arrangements on the HMRC online system
- self-certify new tax-favoured share plans.
If you don't take the above actions in time, you will be subject to automatic penalties and will lose the tax-favoured treatment for certain share options.
HMRC is no longer lenient on penalties. The following automatic penalties will apply:
- immediate £100 penalty for filing after 6 July 2018
- additional £300 if filing is 3 months late
- additional £300 if filing is 6 months late
- £10 per day the filing remains outstanding if 9 months late.
There is also a penalty of up to £5,000 for a material inaccuracy in a return which is not immediately addressed.
What do you need to do?
If any reportable events have taken place in relation to either tax-favoured plans or non tax-favoured plans and arrangements during the 2017/18 tax year, you will need to report them. "Arrangements" includes the acquisition of employment-related securities by employees and directors generally, not just under a formal plan.
Reportable events include the following:
- grant of options
- the exercise of options
- certain lapses of options
- the acquisition of shares
- events under the restricted shares legislation and anti-avoidance rules.
You will need to register all new employee share plans and arrangements online. You will also need to self-certify that any new tax-favoured share plans (EMI, CSOP, SIP and SAYE) meet certain requirements.
Nothing to report?
If you have previously registered a plan or arrangement but have no reportable events for the 2017/18 tax year, you must submit a ‘nil return’ to avoid automatic penalties arising for non-filing.
Next steps – start now – do not leave this until the last minute!
There is only a month left to the deadline. If you have not used the HMRC online site for employment-related securities already, it can take over two weeks to register your plan or arrangement. You will not be able to do your end of year reporting until registration has happened, so you do not want to leave it until the last minute.
If you have granted options over shares in a non-UK company to employees of a UK subsidiary, it will be simpler for the UK subsidiary to be responsible for the online registration, self-certification and end of year reporting.
- You must take screenshots at all stages of your end of year reporting, and for all other activity on the HMRC online site (eg the notification of EMI option grants), for your records.
- EMI option agreements must now include details of any restrictions attaching to the shares subject to the option.
- Your EMI option agreements must include a Working Time Declaration.
- To check that the company is still fully compliant with current EMI rules when granting new EMI options.
- The General Data Protection Regulation (GDPR) came into force on 25 May 2018. If you have not already done so, you should arrange for your share option plan rules to be checked to ensure that they are compliant with GDPR requirements.
- The tax-favoured status of EMI options has been confirmed as a result of the European Commission's grant of a new State Aid approval. EMI options granted between 7 April 2018 and 15 May 2018 will benefit from EMI tax-favoured status.