HMRC require all companies to notify them of a wide range of transactions in shares and securities. This is drawn widely (to include shares, debentures and loan stock held by an employee or a person connected to them) and, based on our understanding of your affairs, we believe it is likely to apply to you.
Companies must take action to comply with these obligations to minimise the risk of losing valuable tax reliefs and incurring penalties.
The notification requirement covers any company that operates an unapproved share plan for employees or directors. It also covers companies in which employees or directors have acquired shares or securities. In most cases, any share transactions involving employees or directors are reportable.
With the change to the online registration also comes a change in who must deal with certain aspects of the registration and notification process. Only the company can perform the initial registration of its share plans (although we can guide you through the process). The ERS service is part of the existing PAYE online service and companies can select to add this service whilst logged onto the HMRC website: https://online.hmrc.gov.uk/paye. Once the company has completed its online registration, if you wish, we can enrol as agent for the company in relation to ERS online services (this would not disturb your current Payroll Provider’s agent status with HMRC). We may then assist with online filing of annual returns.
The deadline to register the creation of a share plan or the issue of shares within the tax year to 5 April 2017, as well as the submission of the separate annual return notifications online with HMRC, is 6 July 2017.
However, as registration for the online service can take at least a week, it is recommended to register well in advance of the 6 July. In addition, if you require us to register as ERS online agents so that we may deal with the relevant annual return notifications this may take three weeks or more and therefore we recommend that you inform us as soon as possible. This will avoid the risk of late filing and the incurring of automatic penalties.
Common events that are disclosed in the notification (formerly Form 42) are (note that this list does not cover all reportable events):
- the issue or transfer of securities;
- the grant or exercise of share options or of other rights to acquire shares;
- the assignment or release of taxable securities options for consideration;
- a rights issue or a bonus issue to employees by an employing company;
- a change in the rights of shares held by employees;
- a sale of securities that are ‘restricted’.
If an EMI option arrangement has been in place in the period, the equivalent notification (that was previously dealt with by the Form 40) must be made online.
A return must be submitted for every share plan registered, even if it is a nil return. HMRC will no longer issue notices to file or reminders, it is now the responsibility of the company to first register online so that the appropriate annual return notifications may then be made.
- Failure to file an annual return by 6 July will result in automatic penalties. Initially, a £100 penalty for missing the deadline will apply, plus additional penalties of £300 after 3 and 6 months if the return is still outstanding. If the return is more than 9 months late, a further penalty of £10 per day may also be charged.
- Penalties of up to £5,000 can also be applied for failure to submit the return in an electronic format or for careless or deliberate errors.
- Any failure(s) may also impact on HMRC.s risk rating for the company and could subsequently result in an unwanted visit from HMRC.
It is widely acknowledged that the process of concluding whether or not there are transactions to report and how to accurately complete the forms is complex; a 52-page completion guide on the HMRC website for Form 42 is testimony to this.
To save both the trouble of dealing with this issue, we can assess the filing requirement, assist you with the initial registration process and then complete the online annual return notifications. Our fees for assisting you have remained the same as last year and are as follows:
Up to 10 reportable events to disclose
£385 plus VAT
Reportable events to disclose
£250 plus VAT
Form 42 or EMI 40
£100 plus VAT
If there are more than 10 reportable events in the period then we will discuss the scope of our work and agree a fee basis with you.
Regarding the new ERS online service we would be happy to guide you through the process of registering the employment related scheme, thus removing any uncertainty you may have on how to meet the filing obligations and, in the process, free up your valuable time. Our proposed fee for registration is an additional £100 plus VAT.
Please contact us should you need any further assistance or advice.