HMRC online reporting for UK employee share plans and share awards by 6 July

Quick read

ERS annual returns – actions to take for the 2023/2024 tax year

If your business offers UK employee share plans, growth shares or share awards, you need to do the following by 6 July 2024 for the 2023/2024 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 2024
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 2023/2024 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 2023/2024 tax year, you must submit a "nil return" to avoid automatic penalties arising for a non-filing.

Notification of EMI option grants – new HMRC deadline

For EMI options granted on or after 6 April 2024, the deadline for a company to notify HMRC of the option grant has been extended from 92 days following grant, to 6 July following the end of the relevant tax year. For example, if an EMI option was granted on 10 April 2024, it would need to be notified to HMRC by 6 July 2025.

HMRC has helpfully confirmed that notifications can still be made during the tax year, making it easier for companies to keep on top of their notification obligations. This is particularly welcome considering that the deadline will coincide with the deadline for the annual reporting obligations outlined above. We would recommend making the notifications during the year.

Click here for our most recent update on the change.

Future changes?

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. Although the government's call for evidence closed in August 2023, we are still waiting for an update on next steps.

Don't forget!

Take screenshots of every stage of your end of year reporting, and for all other activity on the HMRC online site (e.g., 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 reporting obligations.
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 updated its guidance.