UK tax resident companies have an annual obligation to e-report to HMRC all awards of shares, share options and loan notes (in fact any “securities”) to employees and directors. There are very few exceptions. HMRC are known to closely examine the completeness of the e-report against the company claim for corporation tax relief and the individual’s payroll filings under RTI, and so it is important that you get this right. You need to prepare now for the e-filing deadline: for all reportable transactions in the tax year 6 April 2019 to 5 April 2020 the filing deadline is 6 July 2020.
Which transactions are reportable?
Schemes for awards of shares, options and loan notes, whether tax-advantaged or not, will often need a return even if there were no actual movements in 2019/2020: failure to file a nil return will attract penalties. A return of actual movements in shares, options and loan notes is of course also required – that could include grants, vesting, exercises, lapses, cancellations and swaps.
But the requirement to report goes far beyond “schemes”. A single award or gift of a share, option or loan note (so hardly a “scheme”) may well require reporting if the award involves an employee or director (or their associates), and whether or not the individual is a former, current or prospective employee or director. A share disposal at more than market value will typically also be reportable.
The all-embracing UK reporting obligation will typically also capture:
- corporate reorganisations, share for share transactions and MBOs, unless you have secured specific advanced HMRC assurance;
- non-UK awards (typically US Restricted Security Awards) will also need to be reported if UK individuals are the beneficiaries;
- all of this also raises the spectre of “net settlement” and “sell to cover” arrangements and accurate reporting of the actual number of shares delivered.
In all cases you will need to understand the precise legal construction of a transaction or arrangement to decide exactly what you need to report.
In order to make the e-filing, you need to have an active Employment Related Securities portal, accessed from your HMRC PAYE Online account page. Are you registered with HMRC Online? Do you have a PAYE Online account? Do you have the ERS Filing Portal activated? If you are yet to access any of these three, then you need to register online NOW with HMRC, and activate all these in sequence – that takes time, including delivery of security codes in the post, so attend to this now, in advance of a timely e-filing.
Once you can see the ERS Filing Portal in your HMRC account, you need to allocate a “scheme” name, post that on the ERS Filing portal, and once HMRC have confirmed named-scheme registration, then you can start to complete or upload your ERS return.
To discuss any of this, to help identify your reportable events, or to discuss the use of Share Plans in this new financial landscape please call your usual tax contact here at Ross Brooke, Phil Kinzett-Evans on 01635 555666 or David Jones on 07922 425173.