All companies providing shares or options to employees must file an annual return online with HMRC by 6 July 2016 for all transactions in the 2015/16 tax year.
This applies to:
How to report?
- all types of share award (including approved and unapproved options);
- disposals at more than market value;
- certain post acquisition events (such as removing, changes to share rights etc.);
- where the shares were acquired at market value and are shares in overseas parent companies.
All returns since 2014/15 now have to be filed online. While there were internal issues for HMRC that resulted in many employers being unable to file on time last year, we understand that these problems have since been resolved and no such filing issues are anticipated this year.
As a result of these internal issues for HMRC, an amnesty was in place for the 2014/15 tax year. However, penalties will be imposed by HMRC for returns received after 6 July this year.
In order to file an online return, both approved and unapproved schemes need to be registered in advance with HMRC through the online portal. All non-tax advantaged (‘unapproved’) plans can be registered under the one heading but all approved schemes need a separate entry.
An employer will be required to make a declaration that their plan meets the legislative requirements to ensure approval. As HMRC are no longer offering the pre-approval of many plans, you should ensure that any new plan has been reviewed thoroughly before registering.
No transactions in the year?
There is no need to register any non-tax advantaged schemes if there has not yet been a reportable event, but once registered, a return is required.
For all registered approved plans an annual return is required even if there has not been a reportable event in the period.
Please note that failure to register and make annual returns online with HMRC can result in the loss of any favourable tax treatment attached to the approved schemes.
Any other reports?
In the majority of cases, annual returns are the only returns required.
However, for EMI options, all grants still need to be notified online within 92 days. Failure to notify these grants will result in the option being treated as a non-tax advantaged (‘unapproved’) grant. HMRC does not currently confirm the options notified online, as they historically did for older paper notifications, and so employers needs to check carefully that all grants have been notified promptly.
Additional care needs to be taken where companies (or a group of companies) have internationally mobile employees who may have received a share award while in one country and then a vesting event occurs while working in another country. New rules were introduced by HMRC in April 2015 that have caught a number of transactions that may not have been previously reportable.
When looking at global share plans, the terms used are often not familiar in the UK – Restricted Stock Units (RSU), Stock Appreciation Rights (SARs), etc. The UK tax legislation will also not always match that of the home country where the plan was adopted, so tax guidance may not be consistent. Each plan, therefore, needs to be considered separately to determine if any reportable events have occurred.
While for listed entities the value of shares is easy to determine, this is not the case for private companies. In such cases, the market value needs to be determined separately and will be required in many aspects of the annual return process. Where values have not been accurately determined this can impact on the tax implications of the award. In addition to preparing the information required for reporting, this would be an appropriate time to consider whether the basis used for determining the share value is suitable and supportable .
Our specialist team would be happy to assist you in:
- preparing and submitting your annual returns;
- reviewing share/stock transactions to determine whether a report is required;
- queries about on-line registration and filing, who needs to make the report etc.
Please do not hesitate to contact us to discuss any queries or assistance you need: