Employee share plans: Are you ready for the new HMRC requirements?

Written on 12 Feb 2015

Companies operating employee share plans (whether tax-advantaged or unapproved) must take action to comply with the new HMRC online registration and annual reporting requirements. 

For tax-advantaged plans, the company must also make an important annual declaration certifying that the plan meets the legislative requirements. 

It is important that employers consider what is required as soon as possible – we recommend that you do not wait until the deadline of 6 July 2015, as separate steps are required to register a plan and then make the appropriate returns under the new HMRC procedures.

New registration requirements for all share plans 

Under the new regime, employers must register their employee share plans and employment-related security arrangements online with HMRC. This is done using the HMRC Employment Related Securities (ERS) Online Service. 

Tax-advantaged and unapproved arrangements must be registered, although note that it is not necessary to register unapproved schemes until there is a reportable event. 

When a scheme has been registered, HMRC will provide a unique scheme reference number. You will need this reference number to submit your end of year return under the new online procedures (see further below). 

Employer action: register all your employee share plans (including any enterprise management incentive or EMI schemes) and employment-related security arrangements online with HMRC as soon as possible, so that you are in a position to self-certify any tax-advantaged schemes and make your annual returns by 6 July 2015. 

Self-certification of tax-advantaged schemes 

From 6 April 2014, the HMRC prior approvals process was replaced with a new self-certification system for tax-advantaged schemes. 

The company secretary or employer (on behalf of the company secretary) must now self-certify tax-advantaged schemes using the ERS Online Service. This must be done on an annual basis. 

If you operate a company share option plan, savings related share option (SAYE) scheme or a share incentive plan, the company secretary will need to consider the plan to ensure that they are satisfied that the legislative requirements have been met. They must then then make the appropriate online declaration confirming that the scheme meets certain requirements. 

It is important to note that all schemes (whether new schemes or existing arrangements previously approved by HMRC) must be registered and the appropriate declaration made by 6 July 2015. Failure to do so means that the tax advantages will be lost, even if the scheme received formal HMRC approval under the old regime. 

Employer action: if you operate a company share option plan, SAYE scheme or a share incentive plan, make sure that you consider and self-certify your plan by 6 July 2015. 

Annual returns – online reporting 

Companies operating share plans will be familiar with their annual reporting requirements, and in particular Form 42 for unapproved arrangements. In previous years it was necessary to submit paper returns to HMRC. 

For the current tax year ending 5 April 2015 onwards, annual returns must now be submitted online to HMRC, using the ERS Online Service. 

Companies must provide HMRC with an online return for each registered employment related securities scheme or arrangement by 6 July following the end of the tax year. This includes any EMI schemes operated by the company.

This means that the returns must be submitted by 6 July 2015 in respect of the current tax year ending 5 April 2015. If there have been reportable events, then an attachment must be submitted with the return, and HMRC has published templates which are to be used on its website (see below). 

To make a return, a company must be registered to use HMRC Online Services, and it is possible for an agent to be appointed to file the returns on behalf of the company. Please note that it can take up to 7 days for the appropriate reference number to be generated by HMRC. Employers should make sure that plans are registered in good time to enable the annual return deadlines to be met – otherwise penalties will be imposed. 

Employer actions: complete the new online returns and templates for the tax year ending 5 April 2015 and then file them online with HMRC by 6 July 2015. 

HMRC website 

Further information on the registration and self-certification process, together with the templates to be completed and submitted with the annual returns, is available on the HMRC website