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Share Plan Reporting: Upcoming HMRC deadline July 2024

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The 2023/24 tax year ends on 5 April 2024 and the ERS annual return filing deadline is 6 July 2024.

“If you’re an employer operating your own ERS schemes, either you or an agent acting on your behalf must submit an ERS return every year for all schemes operated in that year (and dormant schemes that haven’t been closed with HMRC), including any one-off schemes,” says Martin Cooper, Partner at RSM UK, an experienced provider of audit, tax and consulting services to the middle market. “Obligations will vary depending on location globally, and here specifically we are looking at the UK requirements.”

HMRC reporting

There are various ERS (Employee Related Securities) reporting requirements and annual reporting obligations for employers which may also be required where a company operates any of the following tax-advantaged employee share plans:

“In addition, there is a separate annual ERS return, known as an ‘Other’ return, formerly ‘Form 42’,” says Martin Cooper. “This may be required to report other ERS arrangements outside of the tax-advantaged plans listed above.”

It is important to note that ERS transactions do not need to be part of a formal plan and may include one-off events, such as a transfer of shares between shareholders.

“The type of ERS annual return varies depending on your company’s arrangements and the specific activity that has taken place during the tax year for the employee incentive plan,” says Martin Cooper. “Employers may have a requirement to file one or more ERS annual returns for the relevant tax year.”

Never too early to start planning

“As with many things in business it helps to get ahead in preparation of the annual reporting,” says Martin Cooper.” The more time you give yourself to start your tax year- end planning now the more opportunity it will give you to identify any reportable ERS transactions during the 2023/24 tax year.”

  • You must register ERS arrangements online via HMRC’s ERS online service in respect of the relevant year(s) of activity.
  • Returns may also be filed on the employer’s behalf however it is worth noting that the ERS agent registration process can take a few weeks to complete so should be considered in good time ahead of the deadlines.
  • Once an ERS scheme is registered, an annual return is required for subsequent tax years, unless the plan has been formally closed on HMRC’s ERS online service. If there have not been any reportable events in the tax year, a ‘nil’ annual return is still required.
  • If you have a scheme registered in error, or it is no longer operating, the scheme registration should be ceased by entering a date of final event. You need to submit an annual return for the tax year in which the final event date occurs.
  • There are exceptions for events where reporting may not be required. For example, a report may not be required where shares are transferred by an individual in the normal course of domestic, family or personal relationships of the person transferring the shares.

The ERS legislation and the associated reporting requirements are wide-reaching, so check the detail to avoid costly errors. For example, where non-UK resident employees do not have any UK duties in the tax year of the award, there is usually no need for the company to report their securities if the employees are not likely to become UK resident or work in the UK during the award’s vesting period.

Penalties

Where ERS returns are filed after 6 July 2024 automatic penalties will apply. A fixed £100 automatic penalty is levied per registration where the deadline is missed.

There are also additional automatic late filing penalties which increase over time, including if the return remains outstanding three months and then six months after the due date. If a return is outstanding nine months after the due date, HMRC may charge daily penalties.

HMRC may also charge penalties where returns contain inaccurate information.

There are also important obligations to notify HMRC in relation to setting up and establishing an HMRC-approved incentive plan, such as: EMI, CSOP, SIP and SAYE.

Non-compliance can result in penalties, potential disqualification of the tax-advantaged scheme and unexpected tax charges, such as income tax or national insurance contributions, may arise.

Find Out More

Employee Related Securities (ERS) schemes are a way for limited companies to incentivise employees, up to and including directors, through offering them shares in your company. They are generally designed with the aim of improving retention levels and encouraging employees to grow the business in line with its agreed objectives. Often referred to as equity compensation they can provide an opportunity to positively increase engagement and empowerment among your workforce. ERS schemes can either be tax-advantaged or non-tax advantaged but it’s important for employers to be aware that there are strict tax deadlines for filing returns on these offerings.

Remember, it is important that the share awards plan is structured to meet your commercial objectives and ensure that it rewards and incentivises employees as desired. To find out more about designing share plans or your ERS reporting obligations get in touch, or arrange to speak with one of our equity compensation professionals about what other equity compensation solution might best suit the needs of your company and employees.

Employee ownership, simplified. It’s what we do. For more information about RSM UK visit www.rsmuk.com

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Please Note: This publication contains general information only and Global Shares is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. The Global Shares Academy is not a substitute for professional advice and should not be used as such. Global Shares does not assume any liability for reliance on the information provided herein.

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