Tax

Annual returns for employment-related securities | Deadline 6 July 2020

Written on 29 May 2020

The deadline for submitting annual returns in respect of employment-related security arrangements for the tax year ending 5 April 2020 is 6 July 2020.

This is an important date to note, particularly as many employers will face greater administrative challenges gathering the necessary information this year (with many staff working from home or furloughed due to the coronavirus pandemic).

Annual returns containing details of reportable events during the tax year must be submitted online to HMRC for all:

  • tax-advantaged plans (including enterprise management incentive, or ‘EMI’, options); and
  • non-tax advantaged employment-related securities arrangements (this is widely drawn and will broadly capture any shares if the right or opportunity under which they were acquired was available because of an office or employment).

Companies that have adopted new arrangements during the tax year ending 5 April 2020 are reminded that, in order to submit an annual return, it is necessary for the company to first register the “scheme” with HMRC’s online Employment Related Securities service. The registration process takes up to 10 days, so it is important to allow time for registration to enable companies to meet the 6 July deadline for filing annual returns.

Companies that operate tax-advantaged SIPs, CSOPs or savings related share option (SAYE) plans will also need to complete the important self-certification declaration as part of the annual returns process.

Further information on the registration and annual returns process, together with the templates to be completed and submitted with the annual returns, is available on HMRC’s Employment Related Securities service. Some practical points for companies to note include the following:

  • there are separate templates to use for each type of tax-advantaged plan, and the “Other” template should be used for arrangements which are not tax-advantaged;
  • if there has been no activity for a registered scheme in respect of the tax year then a nil-return should be filed; and
  • it is important to take screenshots of the information uploaded to HMRC, for the company’s records.

Late filing will have serious consequences for tax-advantaged plans and trigger automatic penalties from HMRC. There is an automatic £100 penalty for a late return, with additional increasing penalties if the return remains outstanding for more than three months. In addition, HMRC has the power to impose penalties if a return contains inaccuracies.

If a penalty is issued for late filing, it is possible that (depending on the circumstances) HMRC may consider COVID-19 as a “reasonable excuse”. However, to avoid fines or the need to run such an argument, annual returns should be filed by the deadline of 6 July 2020.

Any developments or updates on HMRC practice relevant to share plans during the coronavirus pandemic will be published in an Employment Related Securities Bulletin, which can be accessed here.

Please get in touch with your usual Osborne Clarke contact or one of the experts below if you have any queries or would like to discuss further.