Employment-Related Securities Reporting – don’t miss the 6 July deadline!

With the end of the 2012/13 tax year, it is now important to consider if your business operated any share plans or issued any shares or securities to employees during the tax year. If so, the company will be required to submit an employment-related securities report to HM Revenue & Customs (“HMRC”) by 6 July 2013.

Reportable events

Companies are required to report any “reportable events” to HMRC on a designated form. For any unapproved share plan activity, a Form 42 should be completed. Similar reporting requirements exist for HMRC approved plans, such as Enterprise Management Incentive Plans, which should be reported on a Form 40.

The definition of reportable events in relation to employment related securities is extremely wide, and can include the following:

  • Any securities, including shares and loan notes, acquired by employees or directors;
  • Any activity related to share options, including the grant, exercise, assignment or release of options;
  • The lifting or variation of any restrictions attaching to any securities already held by employees or directors;
  • Any conversion of securities;
  • Any securities disposed of for more than their market value;
  • Any artificial enhancements of the market value of securities.

Any of these activities will trigger the need to submit a Form 42.

Compliance

HMRC has identified share plans as a key area of employment tax risk, and correct and timely submission of Form 42 has become increasingly important. The deadline for submission for reportable events in the 2012/13 tax year is 6 July 2013.

If you have been issued with a notice to submit a Form 42, this must still be completed, even if it is a nil return.

HMRC can charge penalties for late submission. This included an initial penalty of £300 per reportable event (for example, each option exercise is a reportable event). There can be further penalties of up to £60 per day. Penalties for incorrect returns of up to £3,000 can also be applied.

In addition, late or incorrect submissions can affect the risk profile of the company. HMRC are more likely to focus their attention on those companies which miss filing deadlines or make errors in reporting.

How we can help

Forbes Dawson can help you with both completing and filing your share plan returns in a timely and accurate manner. We can also assist with a review of any share plans to ensure maximum tax efficiency.

If you would like to discuss whether you have a reporting obligation for 2012/13 or would like our assistance with preparing the return, please let us know.

 

 

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