If your business offers UK employee share plans, growth shares or share awards you need to do the following by 6 July 2022 for the 2021/2022 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 2022
- additional £300 if filing is three months late
- additional £300 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 2021/2022 tax year, you will need to report them. "Arrangements" includes 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
- the 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 2021/2022 tax year, you must submit a "nil return" to avoid automatic penalties arising for non-filing.
Don't forget!
- Take screenshots at all stages 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.
- Ensure that EMI option agreements include details of any restrictions attaching to the shares subject to the option. Please note that if you have changed your articles of association/shareholders resolution or constitution as part of a funding round, the summary of restrictions will need to be updated for new EMI options.
- Include a Working Time Declaration in your EMI option agreements.
- 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 agreement 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 board or other discretions to allow option exercises in your option plan or agreements, we recommend contacting us for advice as this is an area still under review by HMRC.
Future changes?
At the Spring Statement 2022, the UK government confirmed that it will not be expanding the EMI scheme. However, it is considering whether the Company Share Option Plan should be reformed to support companies that have 'grown beyond the scope of EMI'.
Here to help
Please get in touch with a member of our Employee Incentives team if you need assistance or further information.
