Changes to the way in which employee share schemes are reported have been in effect from 6 April 2014 and in order to ensure compliance with these new reporting requirements, companies with any form of employee share scheme, whether approved or unapproved, must now register for HMRC’s new ERS online service.
Grant of EMI options
A company must give notice of the grant of EMI options to HMRC within 92 days following the date of such grant. Whilst this has historically been done using paper form EMI 1, this must now be done via the new ERS online service.
Note that if the grant of EMI options is not notified to HMRC within this time limit, it will usually lose its tax advantages unless HMRC accepts that there is a reasonable excuse for the failure to notify.
When registering the grant of EMI options, confirmation must now also be given by the company that the requirements of Schedule 5 of ITEPA 2003 have been met, that each of the employees to whom EMI options have been granted have signed a declaration (either contained within their option agreement or a separate written declaration) confirming that they comply with the working time requirement, and that such declaration is available for inspection by HMRC.
Companies with registered employee share schemes are also required to file an annual return with HMRC by 6 July after the end of the relevant tax year, again via HMRC’s new ERS online service. Note that a return must now be submitted for every registered share plan even if it is a nil return.
With the deadline for the 2014/2015 return looming you must therefore ensure that you register your employee share scheme(s) with HMRC well in advance of 6 July 2015 in order to enable the company to complete its 2014/2015 return by that date.
If the company is not already registered for HMRC online services, you will need to create an online account with HMRC. We understand that activation can take several weeks and it is therefore recommended that you commence this process as soon as possible if you have not already done so.
Note that the company will be unable to file annual returns or record any reportable events until this online registration process is complete and that HMRC will issue automatic penalties to companies who fail to meet the 6 July deadline.
Online filing penalties
HMRC will no longer issue reminders or notices to file and penalties for late filing of annual returns will be incurred by companies as follows:
- an initial fixed penalty of £100 for failing to meet the 6 July deadline;
- a further fixed penalty of £300 if returns remain outstanding for more than three months after the deadline;
- a further fixed penalty of £300 if returns remain outstanding for more than six months after the deadline; and
- a penalty of £10 per day may also be imposed by HMRC if returns remain outstanding for more than nine months after the deadline.
HMRC can also impose a penalty of up to £5,000 for a material inaccuracy in a return which is not corrected by an amended return “without delay”.
If you have not already commenced the process of registering for HMRC’s new ERS online service then you should do so as soon as possible in order to ensure that the company is duly registered by 6 July. You should also ensure that the company’s 2014/2015 return is submitted by this date to avoid incurring fixed penalties for late filing.
Further information and guidance on how to register can be found on HMRC’s website - https://www.gov.uk/tell-hmrc-about-your-employment-related-securities.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.