Welcome to our Employee Incentives Update for spring 2017.
This edition covers:
- the 6 July deadline for companies operating share plans to file their annual returns with HMRC;
- the executive remuneration aspects of the latest House of Commons Committee report on corporate governance;
- a reminder for quoted companies to review their share plans in the light of the introduction of the Market Abuse Regulation; and
- some changes in HMRC practice that companies operating enterprise management incentive arrangements need to consider.
We hope that you find it interesting. If you would like to discuss any aspect, please let us know. Our contact details are set out below.
Don’t forget to file your annual returns
A reminder for companies operating employee share plans: 6 July 2017 is the deadline for filing annual returns online with HMRC for the tax year ending 5 April 2017. This includes enterprise management incentive (EMI) plans and self-certifying any tax-advantaged arrangements operated by the company.
Companies must do this using the HMRC Employment Related Securities Online Service. This includes the templates to be completed and submitted with the annual returns.
If any new plans have been adopted during the tax year ending 5 April 2017, it is necessary to register such arrangements online with HMRC before annual returns can be submitted in respect of them. The registration process can take a few days to complete, so any new plans should be registered by the company as soon as possible, to enable the annual returns and any necessary declarations to be made by the deadline.
Failure to file annual returns and make the appropriate declarations by 6 July 2017 will have serious consequences, including penalties and loss of tax relief for tax-advantaged arrangements.
Corporate governance and executive pay
On 5 April 2017, the House of Commons Business, Energy and Industrial Strategy Committee published its 3rd report on corporate governance.
Overall, the BEIS Committee does not believe that there is a case for a radical overhaul of corporate governance in the UK, but considers that there is scope for significant improvements in order to address the changing nature of company ownership in a globalised economy.
Read more about the proposed reforms (some of which are potentially ground-breaking) and the specific recommendations in relation to executive pay and LTIPs.
Quoted companies and MAR
Whilst almost all quoted companies will have updated their share dealing codes in the light of the introduction of the Market Abuse Regulation in July 2016, the impact of the new rules on employee share plans is sometimes overlooked.
Although in practical terms the operation of many share plans will not be significantly affected for companies which comply with the Investment Association’s Principles of Remuneration, the rules of plans adopted before MAR came into force may be out of date in a number of respects.
In particular, the periods during which awards may be made (and the vesting and exercise of awards) should be updated to reflect MAR closed periods. In addition, historic references to the Model Code should be updated (unless the plans are drafted widely enough to extend to equivalent codes), and further changes may be necessary to ensure that the rules dovetail with the company’s new share dealing code.
EMI options: changes in HMRC policy and practice
Companies operating tax-advantaged EMI option arrangements need to be aware of some recent changes in HMRC policy and practice.
Read more on current HMRC guidance on identifying any restrictions on shares to EMI option holders and the importance of ensuring that the working time declaration is signed.