Employee incentives alert email
All UK employee share plans, whether tax-advantaged or non tax-advantaged plans, must now be registered online with HM Revenue & Customs (HMRC). In this alert we set out the upcoming deadlines for companies operating such plans, and flag some traps for the unwary!
As we highlighted in our briefing note in April last year, the way in which employee share plans are administered went through radical upheaval on 6 April 2014. In brief summary, the key changes are:
- annual returns must now be filed online for all share plans - both tax-advantaged and non tax-advantaged plans - and the plans must be registered online in order to be able to file the returns;
- most tax-advantaged share plans (Share Incentive Plans (SIP), Save As You Earn or Sharesave plans (SAYE), and Company Share Option Plans (CSOP) must now be self-certified, rather than being subject to HMRC approval - i.e. the company must certify that the plan complies with the relevant legislative requirements; and
- grants of options under Enterprise Management Incentive (EMI) plans must be notified to HMRC online within 92 days of grant.
Dates to note
Annual returns for the tax year 2014-15 can be submitted online from 6 April 2015. The final deadline for submission is 6 July 2015, and automatic penalties will apply if this date is missed. HMRC has prepared templates, guidance and a template checking service to assist with the preparation of annual returns, which are available online. Remember that annual returns must contain a declaration that, if a "key feature" of the plan (i.e. a provision of the plan that is necessary for it to meet legislative requirements) has been altered in the relevant year, such alteration does not cause the plan to no longer meet the requirements.
The final deadline for self-certification of tax-advantaged plans that were put in place before 6 April 2014 is 6 July 2015. If a company has put in place a tax-advantaged plan since 6 April 2014, the deadline for self-certification is the 6 July following the end of the tax year in which the first awards or options were granted - so the 6 July 2015 deadline may also be relevant to newer plans. Failure to self-certify in time may mean that future awards and options (and, in the case of CSOPs, existing options) will lose tax-advantaged treatment. A company will, of course, have to be sure that its plan does comply with the legislative requirements, so it may be prudent to factor in time for a "health check" of its plan before the plan's self-certification deadline.
HMRC will not be issuing reminders for any of the deadlines set out above, so it is particularly important that companies are aware of the relevant dates.
- Early Registration: before a company can file an annual return for a plan - whether tax-advantaged or non tax-advantaged - or notify HMRC of the grant of EMI options, that plan needs to be registered online with HMRC (self-certification of SIPs, SAYEs and CSOPs takes place at the same time as registration). The registration process is currently taking 1-2 weeks, and we anticipate further delays as the final deadlines approach and more companies try to register, so do not leave this until the last minute!
- No URS Notification: once a plan is registered, it will be allocated a unique reference number (URS). HMRC will not notify the company of the URS, so it is important to check back on the HMRC online services page to see when the URS is allocated. Note that the URS will replace any existing reference number that was allocated by HMRC to a plan under the old approved regime.
- PAYE number: in order to log in to the online services page, a company must enter its PAYE reference details. The company can use any active PAYE number to register the plan - it will not be a problem, for example, if the company registers under a subsidiary's reference number instead of under the holding company which has put the share plan in place.
- Inadvertent registration of plans: once a plan has been registered online with HMRC, it is not possible simply to "delete" it. A company will have to wait until it can submit an annual return for that plan, and then notify HMRC in the return that the plan no longer exists. This means that it is essential that plans are registered accurately.
- Register old plans: remember that existing plans with outstanding awards or options need to be registered online, even if the company is no longer granting new awards or options under such plans.
- Screenshots: on a practical level, HMRC are advising that companies should take "screenshots" of their online application as it progresses, because there is no other way of documenting the information submitted to HMRC.
- Non tax-advantaged plans: HMRC has confirmed that all non tax-advantaged plans can be grouped together under one registration. Companies should select the "other" category when registering.
- HMRC guidance: HMRC is updating its guidance and online resources relating to online registration and self-certification, but the resources currently available are a work in progress! This situation is exacerbated because HMRC is also in the process of "migrating" its website to the general "gov.uk" address, which means that much of the guidance is difficult to access. Currently, guidance relating to self-certification is available here, annual return templates are available here, and the template checking service can be found here, but these pages may be updated further in due course.
Under the new online regime, companies themselves are responsible for registering, self-certifying and submitting annual returns. We are, of course, available to advise you on the process, and would be pleased to assist with any queries you may have. We would also be happy to carry out a legal compliance health check on your tax-advantaged share plans, to ensure you are in a position to self-certify these plans.