If your business offers UK employee share plans, growth shares or share awards, you need to do the following by 6 July 2023 for the 2022/2023 tax year:
- complete end of year reporting for share plans and arrangements
- register all new share plans and arrangements on the HMRC online system
- self-certify new tax-favoured share plans.
If you don't take the above actions in time, you will be subject to automatic penalties and will lose the tax-favoured treatment for certain share options.
The following automatic penalties will apply:
- immediate £100 penalty for filing after the deadline of 6 July 2023
- additional £300 penalty if filing is three months late
- additional £300 penalty if filing is six months late.
There is also a £10 per day penalty if the filing is more than nine months late and HMRC decides to impose such daily penalty.
There is also a penalty of up to £5,000 for a material inaccuracy in a return which is not immediately addressed.
What do you need to do?
If any reportable events have taken place concerning either tax-favoured plans or non tax-favoured plans and arrangements during the 2022/2023 tax year, you will need to report them. "Arrangements" include the acquisition of employment-related securities by employees and directors generally, not just under a formal plan. This would include growth shares and the acquisition of restricted and unrestricted shares.
Reportable events include the following:
- grant of options
- exercise of options
- certain lapses of options
- the acquisition of shares
- events under the restricted shares legislation and anti-avoidance rules.
You will need to register all new employee share plans and arrangements online. You will also need to self-certify that any new tax-favoured share plans (EMI, CSOP, SIP and SAYE) meet certain requirements.
If you have not used the HMRC website for employment-related securities already, you will not be able to complete your end of year reporting until you have registered your plan or arrangement with HMRC. This can take over two weeks, so you don't want to leave it until the last minute!
Nothing to report?
If you have previously registered a plan or arrangement but have no reportable events for the 2022/2023 tax year, you must submit a "nil return" to avoid automatic penalties arising for a non-filing.
Don't forget!
- Take screenshots of every stage of your end of year reporting, and for all other activity on the HMRC online site (eg the notification of EMI option grants), for your records.
- Check that the company is still fully compliant with current EMI rules when granting new EMI options.
- If you have granted options over shares in a non-UK company to employees of a UK subsidiary, it will be simpler for the UK subsidiary to be responsible for the online registration, self-certification and end of year reporting.
- Check your option plan rules and option agreements carefully when employees are ceasing employment, to ensure that the correct treatment is followed and that the tax implications are appreciated.
- If you are planning on using any discretions in your option plan or agreements to allow EMI option exercises or amend the vesting of such options, we recommend contacting us for advice as this is an area on which HMRC has recently updated its guidance. Read our article on the updated guidance here.
Recent/future changes?
CSOP is now a viable alternative for companies that have outgrown EMI and are looking to implement a UK tax-advantaged plan. From 6 April 2023, the CSOP individual limit doubled to £60,000 and share class restrictions were relaxed. These changes will be of particular interest to growth companies who do not qualify for EMI, such as those who have outgrown the EMI employee limit and gross assets test but were previously prevented from operating a CSOP due to the restrictions on share classes. This includes venture-capital backed companies and others with multiple share classes.
The process of granting EMI options has been simplified. It is no longer necessary for a company to set out details of share restrictions within the option agreement or declare that an employee has signed a working time declaration. The changes apply to both EMI options granted on or after 6 April 2023 and options granted before that date but still outstanding at that date.
From April 2024, the deadline for a company to notify HMRC of the grant of an EMI option will be extended from 92 days following grant, to 6 July following the end of the relevant tax year.
You can find out more about the CSOP changes here and about the EMI changes here.
Finally, the UK government is carrying out a review of the two all-employee UK tax-favoured share plans: SIP and SAYE. Simplification of these all-employee plans could be of benefit to companies who currently find them too onerous and costly to implement.
Here to help
Please get in touch with a member of our Employee Incentives team if you need assistance or any further information.
