Employee-Related Securities: changes to your company’s reporting requirements

Income tax and national insurance contribution (NICs) charges can arise for an employee or director on the acquisition, ownership or disposal by him or her of ‘employment-related securities’.  Whether or not tax becomes payable, your company is required to report the transaction by filing a Return with HM Revenue & Customs.

This note is about the information returns which your company may be required to file and how BKL can help you to meet your compliance requirements.

These include filing the following types of annual return:

  • Form 42 (Unapproved share schemes)
  • EMI 40 (EMI schemes)
  • Form 35 (CSOPs)
  • Form 34 (SAYE schemes)
  • Form 39 (SIPs)

The way in which these annual returns are to be submitted has changed for the year ended 5 April 2015.  It is now mandatory for these to be filed online using the HMRC online filing facility.  Companies can no longer, as in the past, file paper returns.

HM Revenue & Customs will no longer issue notices to file or reminders and automatic penalties will apply for late filing.

What is an ‘employment-related security’?

This term generally relates to shares of your company but also includes debt, derivatives and interests in investment partnerships.  Tax and NIC may be payable where the right or opportunity to acquire the securities (or an interest in securities) is made available by your company (or by a person connected with your company) to a director or an employee by reason of the employment of the person acquiring the securities (or interest).  For these purposes, ‘employment’ includes a former, current and prospective employment.

There is an exception to these rules where an individual transfers shares to a director or employee in the normal course of the domestic, family or personal relationships of that individual – for example, a gift of shares by a parent to a son or daughter working in your family company.

Is my company affected?

Any company with tax-approved share plans must register these arrangements online and file returns by 6 July 2015.

Your company must register:

  • EMI Share option arrangements
  • CSOP schemes, SAYE option schemes and SIPs

How BKL can help

You may wish to deal with the registration of existing Share Schemes and the 2014/15 Reporting Requirement in-house.  If not, BKL will be pleased to assist you with the online registration and deal with the online filing on your company’s behalf.

What we are asking you to do

If you would like us to help you, please let us know if you have provided or arranged to provide shares to a director or employee of your company under an EMI share option scheme, a CSOP scheme, an SAYE option scheme or SIP.  Annual Returns of these schemes are required even if they are nil returns.

Failure to register tax approved share plans

Registration of a CSOP scheme, an SAYE option scheme or SIP needs to be completed by 6 July 2015, or tax advantages provided by the share arrangement will be lost and tax and NIC may become payable.

Unapproved share arrangements

Similarly, please tell us if your company has an unapproved employee share arrangement.  For example, shares have been awarded to a director or employee or options have been granted by the company or exercised by the employee under an arrangement other than an EMI share option scheme, a CSOP scheme, an SAYE option scheme or SIP.

Unapproved arrangements do not need to be registered unless a “reportable event” has occurred since 5 April 2014 but an annual return is required if a “reportable event” has taken place in the year to 5 April 2015.

What must be done?

Before submitting any Employment Related Securities Annual Return for the year ended 5th April 2015 your company must first register the scheme using HMRC’s online service for Employment Related Securities (ERS).  Each scheme must be separately registered.

HMRC Online Services User ID & Password

You may be registered for HMRC Online Services for payroll purposes and, if so, you will be able to register the ERS schemes by entering your ‘PAYE for Employers’ online site by entering your user ID and password.

If your company is not yet registered you can do so by signing up to HMRC Online Services and register for ‘PAYE for Employers’.   As the process can take a couple of weeks, steps should be taken to register as soon as possible.

If you have any questions

If you would like our assistance to deal with the registration of existing Share Schemes and the 2014/15 Reporting Requirement or if you have any questions, please get in touch.  Please get in touch with your usual BKL contact or use our enquiry form.

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

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