With so many reporting requirements for employers it can sometimes be easy to overlook the less obvious, especially where those requirements are either relatively new or the employer is affected for the first time.
Recent years have seen a rise in the popularity of employee share schemes which is not surprising given the tax and other benefits they offer to both employees and employers. A well planned scheme can help employers recruit and retain employees. And they can be one of the best incentives to offer to key staff, helping to keep them in the business and contributing to future growth.
There are a number of tax efficient schemes available, often referred to as approved schemes, each with its own rules and qualifying criteria. But if none of those suits a particular business then it can look at developing its own scheme. An unapproved scheme provides a bespoke solution for the specific needs of the business without all the restrictions of the approved schemes. Despite being unapproved many of these schemes can still achieve a very favourable tax result depending on the rights attaching to the shares or share options and their resulting valuations.
What all these schemes have in common is an annual reporting requirement by way of an online return which must be submitted by 6 July following the end of each tax year. This annual return needs to include details of any acquisition of shares or securities by, and the grant of share options to, employees or directors along with certain disposals and other events occurring during the year. Where no events have arisen, but the scheme has previously been registered, a nil return is still required in order to avoid automatic penalties for non-filing. Penalties start at £100 for missing the deadline rising to £10 per day for continued non-compliance. Penalties for inaccurate returns, or returns not submitted correctly online can be as much as £5,000.
Completing the return may not be a simple process. When filing the return the employer should use the specific template provided on the Gov.uk website. However, in our experience completing the form and even running it past the HMRC employment-related securities checking service to confirm the form is correct, may not be enough and the form may still be rejected. This can cause subsequent delays as the HMRC respond with a solution as to why the form was rejected and how to correct it, which could be the difference between reporting on time and missing the deadline. So it’s essential that employers begin the process as soon as possible so they don’t face a hefty penalty.
If you would like any more information on this issue please contact Jackie Hall or your usual RSM contact.