The deadline is approaching for the HM Revenue and Customs (HMRC) year-end reporting requirement for UK, US and other companies with respect to options and other equity incentive awards granted to, and share acquisitions by, UK employees between April 6, 2019, and April 5, 2020. Additionally, nil returns are required for all inactive plans covering UK employees until you have told HMRC that the plan has ceased.
Annual returns must be submitted by midnight (UK) time on Monday, July 6, 2020 via the HMRC Employment Related Securities (ERS) online service. Companies must have:
- registered to use the service;
- registered each plan or arrangement; and
- self-certified any UK tax-advantaged plans.
If you have not yet registered to use the ERS online service, you should do so before June 29, 2020 as registration may take several days.
Online filing of annual returns in relation to UK tax-advantaged and non-tax-advantaged plans or arrangements
The requirements catch all options and equity incentive awards granted to, and shares acquired by, UK employees by reason of their employment. They also catch the cancellation of existing equity incentive awards and certain other events. Reporting may also be required in respect of non-UK resident employees who carry out work duties in the UK.
A separate online return must be filed for each registered UK tax-advantaged plan (EMI, CSOP, SAYE or SIP) by the July 6, 2020 deadline. You must also notify HMRC if you have amended a key feature of a tax-advantaged CSOP, SAYE or SIP, and state whether the amendment has caused the plan to cease to meet the legislative requirements.
Non-tax-advantaged plans or arrangements
You can choose whether to file separate returns for each arrangement or a single return covering them all. The returns will contain details of any share options that have been granted and exercised, as well as any reportable events in relation to employment-related securities.
View ERS annual return templates and associated HMRC guidance at gov.uk.
Penalties for non-compliance
Failure to file these annual returns on time will result in an automatic penalty of £100 per registration, and any benefits from tax-advantaged plans may be lost. Specifically, a failure to register a tax-advantaged plan will affect the tax treatment of future participants (and additionally, in the case of CSOPs, current participants). Additional penalties will arise where submissions remain outstanding by October 6, 2020 (an additional £300), January 6, 2021 (a further £300), and April 6, 2021 (an additional £10 per day).