Finance Act 2014 introduced a number of significant changes to a company’s reporting obligations with respect to employees’ transactions in shares. The year ended 5 April 2015 is the first year affected by these changes and this year employers will have to battle a new on-line reporting system as well as ensure that they have registered any share schemes that they are currently operating.
In outline, employers must report the grant and exercise of share options, the acquisition of securities and subsequent transactions in them by employees and directors. Because the definition of “employment related securities” is very widely drawn by the legislation, shares held by the founders or main owners of a company can also be affected by the rules and by the reporting obligations.
Because this is the first year in which the new system will be operating, employers will also need to register the share schemes that they are currently operating, including schemes that were previously approved by HMRC. If an employer has outstanding share awards under a Share Incentive Plan (“SIP”), Company Share Option Plan (“CSOP”), Save As You Earn plan (“SAYE” or “Sharesave”) or had granted EMI options before 6 April 2014, then they will need to register the plans on-line or risk losing the tax benefits attaching to them. They will need to register their plans even if they have not made any new awards during the year.
The new rules also require employers to register any unapproved/non-statutory share schemes that they have operated during the year (for example, the grant of unapproved options or awards of partly-paid shares).
In addition to the risk that their existing share schemes will lose their tax advantages, the legislation imposes financial penalties on employers if they do not make their filings, with a late filing penalty of £100 and further penalties if the delay stretches beyond three, six and nine months. Finally, if returns are not submitted using the on-line system, a further penalty of up to £5,000 can be levied.
Our experience of the on-line system over the last few months of filing EMI notices, is that the system is somewhat cumbersome and it can take time for employer’s agents to be authorised to make filings on their clients’ behalf. For this reason, we advise that companies start the process of authorising their agents and compiling data to go into their reports as soon as possible.
For further information and help with company filing obligations please contact the TaxDesk on 0845 4900 509 and ask for Thomas Dalby or Martin Mann.