UK employee share plans: the online annual filing regime

Out-Law Guide | 26 Jun 2015 | 3:50 pm | 6 min. read

Companies must submit their year-end returns in relation to their UK employee share plans and share awards/acquisitions through the online administration regime set up by HM Revenue and Customs (HMRC). 

This guide was last updated in June 2017.

The e-filing regime replaced and updated the previous paper forms, from 2015.

In order to use the service, companies must first register all their employee share plans and arrangements, including existing ones, with HMRC via the Pay as You Earn (PAYE) online services portal. Following registration, companies must file their share plans annual returns online, also via the PAYE online services portal.

This guide sets out what employers should be aware of in relation to the regime, and notes some of the differences between the online and previous paper forms.

The first stage: registration

The deadline for online registration of any plans that existed during the 2016/17 tax year apparently remains 6 July 2017, despite HMRC extending the normal deadline for filing annual returns as a result of service outages during 2017.

As part of the online registration process, plans that benefit from tax advantages in the UK also need to be formally 'self-certified' to benefit from, or continue to benefit from, tax-favoured status. If awards were made under a new tax-advantaged scheme in the 2016/17 tax year, the scheme must be self-certified on or before 6 July 2017 in order for the 2016/17 awards to benefit from the tax advantages. This will apply to Company Share Option Plans (CSOP), Sharesave/Save As You Earn (SAYE) and Share Incentive Plans (SIP), but not to Enterprise Management Incentive Plans (EMI), for which self-certification is not required for the plan, but there is a separate online notification required for each EMI option.

Hints and tips for registration

  • Registration must be done by the company itself, and cannot be done by a tax agent for the company. Similarly, the termination of a scheme can only be registered by the company. Agents can file annual returns, however.
  • Companies need to take care to record and retain the contact information and login details for the PAYE portal and the registration details for each scheme. This can be a challenge, for example, for a large company or group, and when the originally responsible staff member leaves the company.
  • If a scheme is registered in error, or multiple times, HMRC will expect to receive at least a nil return for each registration and every tax year, until the tax year after termination of the scheme is registered. Penalties can be incurred for late filing, which HMRC may waive, but managing the process will be time-consuming, at the least.

The second stage: online annual filing

The new online administration regime also requires companies to file their annual returns online, via the government's PAYE online portal, with one annual return required for each plan or arrangement registered. In order to submit an annual return online, the relevant plan to which the return relates must already have been registered and, where relevant, self-certified.

There are specific returns for UK tax-advantaged plans. There is also a replacement for the old 'Form 42', called the 'Other ERS' return, to cover all other share plans and arrangements. Only one registration is required to cover all non-tax-advantaged arrangements, although companies can choose to have one registration per plan, if preferred.

What is the deadline for online annual filing?

Annual returns for the 2016/17 tax year must be submitted to HMRC via the online portal by 24 August 2017, an extension of the normal deadline of 6 July following the end of the reported tax year, as a result of service outages during 2017.

Companies would be well advised to register, and to self-certify where relevant, their plans and arrangements well in advance of this deadline to ensure that there is sufficient time to complete both the registration and the annual filing.

There can be substantial penalties for failure to file, or late filing of, the annual returns.”

Who should make the online annual filing?

The online filing can be completed by someone in the company; or by an 'agent', authorised by the company and registered with HMRC to act on behalf of the company for these purposes.

The company secretary is required to make certain declarations within the annual return, although in practice these can be given by someone acting on the company secretary's behalf. An agent, or the employee within the company completing the annual return, will want to make sure that they are comfortable that they have sufficient authorisation from the relevant company secretary in order to complete the filing and make the declaration(s) on the company secretary's behalf.

Are the online annual returns different to the paper forms used in previous years?

The online returns are primarily made up of information provided in spreadsheets, with a different spreadsheet for each return; although certain further information is also required at the time of submitting the filing online. Template spreadsheets are available on HMRC's website. The information required in the spreadsheets is similar to that requested in the previous paper returns, although there are some differences.

Hints and tips for completing the annual return spreadsheets

  • In order to be accepted when uploaded as part of the online filing, the spreadsheets must conform exactly to HMRC's requirements including formatting. Companies should use the template spreadsheets available on HMRC's website where possible, or build their own spreadsheets based on HMRC's compatibility data. HMRC has issued a 'technical note' to assist companies who wish to build their own systems.
  • Some companies may have their share plans administered by professional third parties, which may be able to provide the information required in a compatible format. Companies should liaise with their administrators in relation to this.
  • HMRC has released a 'checking service' for companies, allowing them to test whether their spreadsheets will be compatible when uploaded to HMRC's online portal without actually sending any of the data to HMRC. If there are any compatibility issues, an error report will be generated giving details of the fault and where it is located within the spreadsheet. The checking service is available via the plan registration pages within the online portal, and it may be helpful to use this service to correct any errors before attempting actual submission.

How do I file the annual return?

In order to file the annual return online, the company or its agent must access the PAYE online services portal and select the registered plan/arrangement in relation to which it wants to file the return. Once selected, you will see a 'start' page, which lists the information that you will need in order to file the return.

After this, you will be taken through various screens which will allow you to make a nil-return or upload the spreadsheets containing the reportable information. You will also be required to give details about the company filing the return and any other group companies covered by it.

For tax-advantaged plans other than EMI, you will also have the opportunity to declare if there has been an alteration/variation that needs to be notified to HMRC and to confirm whether the requirements of the relevant legislation governing the plan continue to be met. This replaces the previous system of having to obtain prior HMRC approval for these events.

At the end, you will be shown a summary page with the information provided in the return although not the information in the spreadsheets themselves. Once you have completed the filing by confirming that the information in the return is correct and complete, you will see a confirmation page with an individual submission reference. This can be downloaded as a PDF and saved onto your system. Once you get to this point, as long as the return has been filed within the deadline, there will be no penalties for late submission.

You will need to complete this process for each return required in relation to each plan or arrangement.

After approximately 48 hours, the plan registration pages within the PAYE online portal should be updated to show the return as having been successfully submitted.

Hints and tips for filing the annual returns

  • For earlier tax years, it was possible to upload a list of group companies participating in a scheme, rather than having to enter the list manually online, although HMRC did not provide a template spreadsheet for this purpose. This is not possible for tax year 2016/17, but companies with an HMRC Customer Relations Manager (CRM) can enter only one participating company manually and email a separate list of all participating companies to the CRM.
  • If you realise that you need to make changes to any of the information you have inputted or uploaded as you go along, you should use the 'edit' function from the summary page near the end of the return rather than trying to use the backspace.
  • Once you have submitted the return, you will not generally be able to see the information that you have included within the filing. You should therefore keep careful records, including screenshots, of the final information submitted.