An important deadline is fast approaching affecting certain reward schemes. You must register with the Revenue all new employment-related securities, including one-off awards or gifts of shares, by 6 July. So, all new tax advantaged schemes should be registered by 6 July following the tax year it was established. After that date three very popular schemes cannot be registered, namely Share Incentive Plans, Save as You Earn and Company Share Option Plans. Registration must be done using the
online administration service set up by HMRC. It is important to get this right because penalties and loss of tax relief, in the case of tax-advantaged plans, will apply in the event of failure to comply with the deadline.
Our share plans team has flagged this in their Outlaw Guide ‘UK employee share plans - the online annual filing regime’ where they explain in detail the mechanics of the online system. So, let’s hear more about what’s required and the consequences of missing out. Charlotte Nickel joined me by video-link to discuss it. I started by asking why it’s a big deal:
Charlotte Nickel: “I think there are two elements to that question. The first is, if you don't file by 6 July then you are going to be subject to some penalties, some fairly small penalties but they can add up if you've got a lot of plans and the longer you leave it, the larger those fines can be. The second element is if you've got any tax advantaged plan, so that might be CSOP, SAYE, SIP plans that the company operates, then if you don't register those plans that you've started in the last tax year, by 6 July, then the tax advantaged status of those plans could be lost and, obviously, the impact for the company and participants could be severe. So, those two elements, and also the point that HMRC don't normally send out reminders to file these returns and to register these plans so it's something that companies can often forget about until the last minute.”
Joe Glavina: “So what are the plans that this relates to?”
Charlotte Nickel: “So, essentially, all UK share plans. So, that can be the tax advantaged plans, as I mentioned before, the SAYE, SIP, CSOPs. There is also an EMI return that needs to be filed as well, and then also there is a fifth return that might need to be filed, which is other employment related securities, what used to be called Form 42, and that is for any share awards that are made to employees of a company even if they are not tax advantaged. So, any types of share awards will be caught by this annual return filing requirement.”
Joe Glavina: “I know HMRC routinely imposes fines for late filing. So, are we talking big numbers? Is that why this filing deadline is so important?”
Charlotte Nickel: “So, the penalties are not that high originally. Normally, if you missed the 6 July deadline they automatically impose a £100 penalty per return so if you've got a lot of company plans that can add up, but also they will add up over time so if you leave it for more than three months there can be higher penalties and there can even be a daily penalty imposed later on. But I think the more important element in terms of the cost to the company would be the loss of the tax advantaged status of tax advantaged plans if the returns and the registration is not filed by 6 July for the first year in which those plans operated by the company. So that is the much more crucial element as to why these deadlines needs to be met.”
Joe Glavina: “This seems to be a payroll issue really, so what is your advice to HR on this? Presumably a communications piece?”
Charlotte Nickel: “Yes, definitely. So, I think for HR the important thing is to make sure that this hasn't been forgotten. As I said, HMRC don't send out filing reminders so it's ensuring that whoever is responsible in the company for filing these returns and dealing with share plans is on top of this. Also, HR may have an information gathering requirement. The returns have quite lot of information that needs to be put into them. There is an Excel spreadsheet that HMRC templates that they've put on their website that needs to be filled in and there's quite a lot of information there that I suspect that HR will be being asked for so that the company can complete these filings.”
Joe Glavina: “Last question, Charlotte. I gather HMRC has provided a checking service for companies which allows them check compatibility without actually sending any of the data to HMRC. Is that right?”
Charlotte Nickel: “Yes, that's correct. So, as I said, the annual returns are completed through an Excel spreadsheet and there are templates on HMRC’s website and it's important that you use those templates because from a technical perspective they are the only ones that will be able to be uploaded through the online portal. If you're having trouble uploading to that portal there is a there is a check mechanism. Once you have logged into the PAYE you can upload the relevant Excel spreadsheet but not submit it and then there will be a check put in place over that Excel spreadsheet and if there are any errors that would stop it from being filed the check will flag up where those errors are in the spreadsheet so then they can be corrected and then you can submit the return on time.”
The share plans team has produced a detailed note on the issues covered in this programme. It is called ‘UK employee share plans: the online annual filing regime’ and you can find it on the Outlaw website along with all the latest developments.