A new online registration, certification and reporting system was recently introduced in the UK, applying to all employee share plans and arrangements. The first major deadline for online reporting is approaching (6 July 2015) and employers in the sector should be aware of the new requirements in order to prepare for online registration and reporting of their arrangements.
It is recommended that companies take action early as it is effectively a two stage process. If action is not taken in time, the tax advantages associated with certain of your employee share plans may be lost.
New online reporting system
From 6 April 2014, a large part of the employee share plans administration process for both tax-advantaged and non tax-advantaged arrangements moved online.
In the case of tax-advantaged arrangements, an annual declaration that each plan complies with the legislation (self-certification) will be required to be made online, including for commonly used arrangements such as share incentive plans (SIPs), company share option plans (CSOPs) and save as you earn option plan (SAYE option scheme). These types of arrangements are very common and many companies in the retail sector operate them.
All new and existing tax-advantaged arrangements will be required to ‘self-certify’ if they wish to qualify for the applicable tax treatment. By notifying and self-certifying the arrangements, the tax advantages are protected. Failure to notify will mean any tax advantages may be lost.
In addition, the annual reporting of ‘non-tax advantaged’ plans and arrangements must be linked to a registered arrangement. Therefore, in order to complete an electronic annual return, it will be necessary to have first electronically notified the existence of the plan, scheme or arrangement to HM Revenue & Customs.
The registration process
The registration of employee share plans has been developed by HM Revenue & Customs as part of the Pay-As-You-Earn (PAYE) online portal. Many companies will already have access to this service for payroll purposes. However, companies that do not have access to HMRC online will need to register with HMRC. Once registration has been requested, an activation code is sent to the company and it will be able to use this to access the PAYE portal.
It is also possible for agents to be granted access to PAYE online and multiple agents are allowed for each company. It is worth noting that agents must be registered before they can have access, so if clients anticipate asking an agent to complete their returns they will need to allow sufficient time to get them registered (and to complete the returns).
Issues and considerations
The introduction of the online reporting system has also been accompanied by new penalties for companies that fail to comply with the reporting requirements. From 7 July 2015, HMRC will be able to issue automatic penalties to companies who fail to meet the deadlines and/or if the information is not reported to them in the required format.
In order to meet the deadline, it is therefore recommended that companies prepare well in advance, as it is effectively a two stage process to register and then submit an annual return (there is typically a short delay between registration of plans and issue of unique reference numbers that are required for annual reporting).
As this is the first year of online registration and filing, there is likely to be an increase of companies using the online portal as the July deadline approaches. Whilst this may proceed smoothly, clients should be advised to register as early as possible in case the system struggles nearer the deadline.
There may also be problems in defining what should be reported and what should not.