The advantages of employee share plans for both employees and employers are well known. Employees are given the opportunity to share in the success of the business and enjoy potentially valuable rewards, sometimes tax efficiently. For employers, share plans can be an ideal way to engage and motivate the workforce, as well as a cost-effective way of remunerating employees.
The UK tax authorities’ (HMRC) submission deadline for annual return filings in relation to employment-related securities for the 2020/21 tax year is midnight on 6 July 2021. Annual Share Plan reporting can now be filed online with HMRC.
All reporting must be done via the HMRC Employment Related Securities (ERS) online service. In order to submit returns, companies must have registered with HMRC to use the service, registered each employment related securities scheme or arrangement, and self-certified any tax advantaged plans.
We’ve outlined the steps you need to take to ensure a smooth reporting process for the 6th July 2021 deadline.
WHAT TO KEEP IN MIND
Scope of the reporting requirements
The ERS reporting requirements apply to any share options, shares and other types of security that are acquired by UK employees by reason of their employment. It can therefore apply to share options and other kinds of share incentive that are granted by non-UK companies to UK based employees. Reporting may also be required in respect of non-UK resident employees who carry out work duties in the UK.
Each ERS plan or arrangement should be registered online, however non-tax advantaged plans or arrangements do not need to be registered until there is a reportable event.
Self-certification of UK tax advantaged plans
Companies that operate tax advantaged ERS plans, such as Share Incentive Plans (SIPs), Savings Related Share option plans (SAYE) and Company Share Option Plans (CSOPs) must self-certify online that the plan complies with the relevant statutory code. The company secretary (or the employer on their behalf) should complete an online form declaring certain requirements have been met at the date of registration or from when the first option or award was granted.
Online filing of annual returns
An online return must be completed for each registered ERS plan or arrangement by 6 July following the end of the tax year. The returns will contain details of any share options that have been granted and exercised, as well as any other reportable events in relation to employment-related securities.
Top 5 Admin Errors identified by HMRC
1. Duplication or the incorrect registration of schemes
If you’ve already registered a scheme, you should select ‘view scheme arrangements’. A common error is selecting ‘register a scheme or arrangement’, which causes duplication of the same scheme and can lead to unnecessary penalties.
2. Not filing in good time and failing to file nil returns
Even if there has been no share plan activities or ‘reportable events’ during the tax year 2020/2021 you must file a nil return. Failure to do so could result in penalties. The deadline for reporting Annual UK Share Plan filings is 6th July 2021.
3. Failing to correctly cease a scheme
To cease a scheme, select “view schemes and arrangements”, then select the relevant scheme and choose the option ‘End of year returns’. You must then select ‘provide a final date of event’ and enter the date. This can only be completed by the company and not an ERS agent.
4. ERS online access and uploading templates
Any alterations to the template, including formatting changes, deleting columns or tabs will prevent you from being able to upload the template to the gateway. You will receive an error message if this is the case.
5. Late notification of Enterprise Management Incentives (EMI) options
Following registration of EMI scheme an acknowledgement receipt will be sent to you. HMRC can take up to 10 days to approve a scheme registration. You can check for your scheme reference number by selecting ‘view schemes and arrangements’.
Once the scheme reference number is available, notification of the options is then required. This MUST be done within the legislative timeframe – 92 days.
If returns are filed after the deadline (6 July 2021), penalties may be imposed, and any tax advantages from a tax-advantaged plan for employers and employees may be lost. It is therefore important to start making the necessary preparations for annual returns compliance.
How can we help?
We can provide advice and assistance in relation to all aspects of the annual reporting requirements. For further information on how we can help see our full list of tax services or please get in touch.