With compliance audits of businesses that offer employee incentive arrangements becoming more common, the spring and summer months are the time to get your house in order. If your business operates an Employment Related Securities (ERS) scheme, you should be familiar with 6 July as the deadline for submission of your ERS annual return to HMRC. You now have just over a week to file your annual returns, or risk attracting a penalty.
Penalties for failure to register new Employment Related Securities (ERS) schemes with HMRC, late returns, and errors on ERS returns can mount up, so don’t get caught out. Late filings incur an automatic £100 penalty, with an additional £300 penalty after three months, a further £300 after six, and a £10 daily rate after that.
If during the past year you have opened new Employment Related Securities (ERS), such as a tax-advantaged Save as you Earn plan (SAYE), Company Share Option plan (CSOP), Share Incentive plan (SIP) or Enterprise Management Incentive plan (EMI), you need to register these individually with HMRC by 6 July (for plans opened during the preceding 12 months), and certify that these meet the conditions of the relevant scheme.
Equally, if you have share transactions with employees that don’t sit inside a formal scheme but have taken place in the past year, you may need to take advice as these can be deemed to be a ‘plan’ and thus require registration.
Your employees’ non tax-advantaged plans can also be notified to HMRC, but only need a single registration, and if you have had any reportable events under a non tax-advantaged plan, these will also need to be reported by 6 July.
Corporate solicitor Abby Watson pointed out the importance of taking swift action: ‘It’s crucial that companies file their EMI share option annual returns with HMRC prior to the deadline of 6 July, even if there’s nothing to report (a nil return). Failure to do so will incur a late filing penalty of £100. Additional automatic penalties of £300 will be charged if the return has still not been filed three months after the original deadline of 6 July, and a further £300 if it’s still outstanding six months after that date. If HMRC don’t receive your return nine months after the 6 July, you could be fined £10 a day.’
Compliance guide for ERS schemes
|Action to take:||Points to consider:|
|Create an HMRC online account and begin the returns process (ideally April of the reporting year)||You’ll need to nominate individuals in your organisation to complete and sign off returns.|
Create a Government Gateway user ID and password to communicate with HMRC.
You’ll need the HMRC scheme reference number – normally issued within 7 days of registration.
|Gather together the information you need||Do you have any reportable events or new plans? |
Look at the HMRC guidance, and review the template forms.
Find out who in your organisation holds accurate information and identify if you’re missing any data.
|Tell HMRC about your new tax-advantaged share schemes by 6 July||Registration must be done online. |
For tax-advantaged schemes such as CSOPs, SAYE, EMI, and SIP schemes, you must also certify that these are compliant with the necessary requirements.
If you’ve made changes to existing schemes, ensure that these are still compliant.
|Complete the returns||Fill out your annual return(s). Make sure you use the right formats for dates and monetary values. |
You can submit a test form in advance to check you’ve done everything right.
Keep a record of supporting information and ensure that the information given correlates with your other records (PAYE and corporation tax returns for example). There’s a penalty of £5,000 for errors!
|Register non-tax advantaged schemes when there’s a reportable event||If a reportable event occurs, for example, an employee acquires or disposes of shares or options, register your plan with HMRC.|
|Submit your annual return by 6 July each year||Even if there have been no transactions (in which case, file a nil return). |
Late filing penalties apply.
|Special rules for EMI options||Tell HMRC about the grant of any EMI options within 92 days of the grant.|
|Tell HMRC if a scheme ends|
How Harper James can help you with share plan reporting
If you’re concerned about the mechanics of share plan reporting, including how to avoid automatic penalties for late submissions and the risk of errors, we can help. Our corporate solicitors can:
- Review your schemes and share transactions with employees to see whether registration with HMRC is needed
- Make sure that your SAYE, CSOP, SIP and EMI schemes comply with the scheme rules and remain tax-advantaged
- Review your payroll and tax data and record keeping and identify any gaps in information
- Help you to register your plans, including becoming your agents so that we can submit returns on your behalf
- Review any changes to SAYE, CSOP, SIP or EMI schemes to check that these are still compliant
- Give you legal advice and assistance in the interpretation of ERS-related legislation
- Audit your previous returns to check for errors, correct mistakes and resubmit reports on your behalf
- Help you close down your ERS schemes and make the necessary notifications to HMRC