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Employment related securities: your company’s reporting requirements

25 March 2019

 

Income tax and national insurance contribution (NIC) charges can arise for an employee or director on their acquisition, ownership or disposal of employment related securities (ERS). Whether or not tax becomes payable, your company is required to report the transaction by filing a return with HMRC.

What are the information returns which your company may be required to file and how BKL can help you to meet your compliance requirements?

They include filing the following types of end-of-year annual return:

  • Enterprise Management Incentive (EMI) option schemes
  • Other employment related securities (unapproved share arrangements)
  • Company Share Option Plans (CSOP)
  • Save As You Earn (SAYE) schemes
  • Share Incentive Plans (SIP)

HMRC no longer issues notices to file or reminders, and automatic penalties will apply for late filing. It is mandatory for annual returns to be filed online using the HMRC online filing facility.

What is an employment related security?

This term generally relates to shares of your company but also includes debt, derivatives and interests in investment partnerships. Tax and NIC may be payable where the right or opportunity to acquire the securities (or an interest in securities) is made available by your company (or by a person connected with your company) to a director or an employee by reason of the employment of the person acquiring the securities (or interest). For these purposes, ‘employment’ includes a former, current and prospective employment.

There is an exception to these rules where an individual transfers shares to a director or employee in the normal course of the domestic, family or personal relationships of that individual – for example, a gift of shares by a parent to a son or daughter working in your family company.

Is my company affected?

Any company with tax-approved share plans must register these arrangements online and file returns by Saturday 6 July 2019.

Your company must register:

  • EMI Share option arrangements
  • CSOP schemes, SAYE option schemes and SIPs

How BKL can help

You may wish to deal with the registration of existing Share Schemes and the 2018/19 reporting requirement in-house. If not, we are pleased to assist BKL clients with the online registration and deal with the online filing on your company’s behalf.

If you would like us to help you, please let us know if:

  • You have provided or arranged to provide shares to a director or employee of your company under an EMI share option scheme, a CSOP scheme, an SAYE option scheme or SIP. Annual returns of these schemes are required even if they are nil returns
  • Your company has an unapproved employee share arrangement. For example, shares have been awarded to a director or employee or options have been granted by the company or exercised by the employee under an arrangement other than an EMI share option scheme, CSOP scheme, SAYE option scheme or SIP

Unapproved arrangements do not need to be registered unless a “reportable event” has occurred since 5 April 2014, but an annual return is required if either a “reportable event” took place in the year to 5 April 2018 or your company filed an annual return online for an earlier year.

What action should my company take?

Before submitting any ERS annual return for the year ended 5 April 2019, your company must have registered the scheme using HMRC’s online service ERS. Each scheme must be separately registered.

You may be registered with HMRC online services for payroll purposes and, if so, you will be able to register the ERS schemes by entering your ‘PAYE Online for employers’ user ID and password.  If you have added extra security protection, an access code will be texted by HMRC to a designated person at your company.

If your company is not yet registered, you can do so by registering for HMRC’s PAYE Online service. As the process can take a couple of weeks, it’s best to register as soon as possible.

For more information and assistance, please get in touch with your usual BKL contact or use our enquiry form.