WARNING! Time is running out for the electronic notification to HMRC (registration) of all employment – related securities arrangements, not only existing HMRC-approved share plans and new ‘qualifying’ tax-advantaged plans. You have until 6th July 2015 to do so. If you fail to do so by that deadline, participants under tax-advantaged plans may lose the tax benefits relating to the acquisition and holding of their shares.
As regards all other ‘non-tax advantaged’ plans and arrangements, the idea behind the new reporting regime is that every annual return of a reportable event must be ‘linked-back’ to a registered arrangement. It follows that, in order to complete an electronic annual return (in place of the old ‘Form 42’), it is necessary to have first electronically notified (i.e. ‘registered’) the existence of the plan, scheme or arrangement. Likewise, an annual return is required to be made for every registrable scheme or arrangement. That said, it is understood that, in relation to non-tax advantaged arrangements (only), it is not necessary to register the arrangement unless and until the first tax year in which there occurs a reportable event.
Share Incentive Plans (“SIPs”), SAYE option schemes, and CSOPs – registration
In practice, all such existing plans should, ideally, be registered before the end of the current tax year. This will ease the process of post-year end annual reporting. Registration can only be done through the HMRC Online Services PAYE portal, and only by the individual who has unfettered authority to access such online services.
If a pre-6 April 2014 ‘approved’ scheme is not registered by 6 July 2015, awards and grants made on and after 6 April 2014 will lose their tax advantages.
The tax advantages of awards and grants of options under SIPs and SAYE option schemes before 6 April 2014 will be protected, but the tax advantages of CSOP options granted before 6 April 2014 will not be protected.
When registering a pre-6 April 2014 approved scheme, a declaration must be made that the scheme met the legislative requirements at that date and has since continued to do so. It is accepted that, having been formally “approved” by HMRC, the scheme did meet those requirements at the time of approval and therefore, if no alteration has since been made to the plan and it has since been operated in accordance with its terms and the legislation, the company should be able to make the declaration.
The registration should be in the name of the scheme so that HMRC can link the declaration to the scheme on their records.
Every new (post 6 April 2014) tax-advantaged plan established in the current tax year must be registered by 6 July 2015 if participants to whom awards or grants have been made in the current tax year are to benefit from the tax advantages.
In the case of a scheme extending participation to employees of members of a group of companies, the scheme should be registered in the name of the company which has established the plan or, if that company does not have a payroll, one of the group employer companies which does have a PAYE online account.
Care must be taken to identify ‘old’ plans under which employees or ex-employees still hold shares or unexercised options notwithstanding that no fresh awards have been made in the current tax year. Particular care is needed in identifying any plans ‘inherited’ by the acquisition of companies which had their own HMRC-approved plans and under which shares or securities are still held, or ‘roll-over’ options have been granted and remain unexercised.
Prototypes of the new-style annual returns are available on the HMRC website Templates and guidance for notification can be found at https://www.gov.uk/tell-hmrc-about-your-employment-related-securities. Preview screenshots for submitting a company’s annual return are also available at http://ers-return.herokuapp.com/.
No reminders or notices to comply will be issued by HMRC to companies which fail to complete registration or online annual returns but there will be penalties for late submissions:
£100 for missing the deadline; plus £300 after 3 months; plus £600 after 6 months; plus £10 per day after 9 months.
Other employment-related securities plans and arrangements
Every such plan or arrangement must be identified and registered in order that an annual return giving details of a reportable event can be submitted by 6 July after the tax year-end.
Given that many acquisitions of employment-related securities will have been pursuant to one-off bespoke arrangements, it may be difficult to identify all such arrangements for the purpose of registering them. In practice, it is understood that HMRC will accept that, within a company or group, a registration of unapproved, or non-tax advantaged arrangements, under the generic title of ‘unapproved arrangements’ will suffice. Registration in this, or in a bespoke manner, is required in order for a reportable event to be notified in the electronic annual return. Within a group of companies, registration by the principal employer or by another group employer, being in either case a company which has an online PAYE portal, will suffice. Again, it is understood that registration of such an ‘unapproved’ employee share acquisition or arrangement is not required to be made until a tax year in which there is a reportable event.