Companies must submit an online annual return to HMRC in relation to each of their employee share incentive arrangements, including nil returns, by 6 July 2016, otherwise there can be penalties of up to £5,000. This is only the second year since these online filing requirements were introduced, and although HMRC has said this week that they have received greater numbers of returns now than by this point last year, many businesses are still likely to be overlooking arrangements that they should be reporting.
The 6 July deadline for this year is relevant to all types of options and awards granted to employees and former employees in relation to their employer’s shares before 6 April 2016, even those which were not made under one of HMRC’s statutory tax advantaged plans (such as enterprise management incentives (“EMI”) options). It also applies to arrangements where there has been no tax to pay or no activity year on year. Extra requirements apply to an HMRC statutory tax advantaged scheme (other than an EMI) if it has been operated for the first time in the tax year 2015/16, as HMRC must also receive notice of this by 6 July 2016, together with a declaration that the relevant legislation has been complied with. Failure can result in penalties and a loss of tax benefits for the awards under the scheme.
HMRC’s website gives details of all of these filing requirements, as well as the relevant annual return templates to be used. To submit an annual return for a scheme, a business first needs to have registered it at HMRC Online Services and received a unique reference number from HMRC, which it then refers to when filing the annual return. Obtaining this number can take a number of days, so will be relevant for companies who are filing returns for the first time.
This week HMRC have also published factsheets outlining how they will be checking companies’ compliance and their penalty regime. Companies should therefore review all existing share-based awards to employees (and former employees) to make sure that they make the correct filings in time.