The 2023/24 tax year has ended so now is the time to start thinking about your annual employee share plan reporting obligations. Annual returns for the last tax year must be filed online with HM Revenue & Customs (HMRC) by 6 July 2024 and are due in respect of all the employee share plans or arrangements you had in place during that period, even if there has been no activity.
The filing process can be time-consuming and tricky to navigate so the sooner you start it the better. If you need help in dealing with your returns, please get in touch with a member of the Travers Smith Incentives Team.
Points to note:
- 6 July 2024 is a hard deadline, so it is
important you submit your returns by that date (note that it falls
on a Saturday this year). Companies will not receive a reminder
from HMRC to file their returns so don't wait for one!
- An initial penalty of £100 will be due if a return is
just one day late.
- You must submit a return in respect of each share plan
registration. If there was no activity in the 2023/24 tax
year (for example, no new grants), you must complete a nil
return.
- You need to make a return in respect of all your share
plans and arrangements (tax-advantaged and non
tax-advantaged) whether or not they were put in place with a formal
set of plan rules. This includes the grant of options to (or
acquisition of shares and other securities such as loan notes or
carried interest by) employees and directors (including
non-executive directors). As well as UK employees, you may need to
make a report in respect of non-UK employees with UK duties.
- Before you can make an annual return, your share incentive
arrangement or plan must be registered with HMRC
under the ERS online service (part of the HMRC PAYE online
service). If you aren't sure whether an arrangement is already
registered, you can check by going to the "view" tab in
your ERS online account (through your PAYE online portal). Note
that the registration process can take a few days.
- All your non tax-advantaged arrangements and plans can
be registered under a single reference number and a return
submitted on the "other" template. In contrast,
each of the tax advantaged plans (CSOP, SAYE, SIP and EMI)
must be registered and reported separately. The HMRC
template annual return for tax-advantaged CSOP options has been
updated this year to reflect the increase in the value of options
that an individual can hold to £60,000.
You can access the HMRC templates and guidance notes here:
https://www.gov.uk/government/collections/employment-related-securities
- Your return will be rejected if it contains formatting
errors, so it is a good idea to take advantage of the
HMRC's checking service before submitting your return. A link
to this service can be found here:
https://www.gov.uk/guidance/spreadsheet-checking-service-employment-related-securities-ers.
Note that leaving gaps between lines can lead to information not being captured.
- The sale of shares or securities by your
employees and directors and the cancellation or exchange of
awards may also need reporting. Take advice if you
aren't sure as HMRC can charge a penalty of up to £5,000
if a return contains a material inaccuracy.
- Before you submit your returns, you should save a copy for your own records. Take screenshots of each page before submitting and save them together with a copy of the confirmation page. This is because the HMRC online service won't save these details and you won't be able to access them again.
Further information about the process for registering your share plans can be found here: https://www.gov.uk/guidance/tell-hmrc-about-your-employment-related-securities
Guidance on submitting your returns can be found here: https://www.gov.uk/guidance/submit-your-employment-related-securities-ers-return
EMI Notification Period from 6 April 2024
Historically, awards granted as tax-advantaged Enterprise Management Incentives (EMI) had to be notified to HMRC within 92 days of grant. This has been changed so EMI options granted from 6 April 2024 do not be notified until 6 July following the end of the tax year (bringing them in line with other forms of tax-advantaged plans). However, given the tax advantages at stake if they are not notified in time, we encourage companies to continue to notify HMRC of EMI options as soon as possible after they are granted. The EMI notification template remains a separate document to the annual return form.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.