Share Transaction Notification deadline approaching

Employers who have provided shares or options to employees by virtue of their employment need to submit an annual return by 6th July 2020, or face potential penalties and the loss of valuable tax reliefs.

There is a requirement for all companies to notify HM Revenue & Customs of various transactions in employment related securities; the term “securities” mainly includes shares but also extends to debentures and loan stock.

What do I need to declare?

Certain ‘events’ are disclosed to HMRC using the Employment Related Securities Annual Return (formerly Form 42). ‘Events’ that need to be reported include:

The acquisition of new shares or securities by reason of employment
The grant of options over securities (excluding under an EMI scheme)
The lifting of restrictions in relation to securities
Benefits arising from securities post acquisition
Artificial enhancement of the value of securities post acquisition
Securities sold for more than market value.

Shares issued on incorporation or acquired from company formation agents do NOT need to be reported. Also, where shares are transferred in the normal course of domestic or family relationships no report is required.

If a company has a qualifying EMI scheme in place during the tax year then the company will also be required to submit an online annual notification (previously Form 40), even if there is nothing to report in the year.

When is Submission Due?

For the tax year ended 5 April 2020, the deadline for submission of the above to HM Revenue & Customs is 6 July 2020. Registration for the online service can take at least a week, therefore it is recommended to register well in advance of the deadline. In addition, registering an agent to deal with the relevant annual return notifications may take several weeks, therefore we recommend that you inform us as soon as possible.

What are the Penalties for Late Submission?

Where a plan has been registered with HM Revenue & Customs (either for this year or for the previous tax year), and the employer does not submit an annual return by 6 July 2020, an automatic penalty of £100 per registration will arise. A plan can exist when there has been an Employment Related Securities return in a previous year, even if this related to a one-off event.

An additional penalty of £300 will arise where submissions remain outstanding by 6 October 2020, and a further £300 penalty will be charged if the submission still hasn’t been made by 6 January 2021. Any returns that remain outstanding after 6 April 2021 will be subject to a penalty of £10 per day.

If no reportable events occur during a tax year in relation to a registered plan, a ‘nil’ return must be submitted by the filing deadline to avoid a penalties.

What Action is Required?

The process of concluding whether or not there are transactions to report and how to accurately complete the forms can be complex. Furthermore, as mentioned above the registration process with HM Revenue & Customs can take time, therefore immediate action is recommended.

If you would like to discuss any of the above with a member of our tax team, please call 01246 559955 or 0114 2671617. To arrange a free consultation, please complete our online enquiry form and a member of the team will get back to you.