Hefty penalties for failure to report employment-related securities schemes

The issue

Most people are familiar with the two major tax reporting deadlines:

  1. For individuals – the 31 January following the tax year-end; and
  2. For companies – 12 months after the end of the accounting period.

Lesser known is the additional 6 July deadline to file an Annual Return for any company that has an employment-related securities (ERS) scheme or arrangements.

ERS schemes or arrangements have to be registered with HMRC within 90 days of the date of the shares being granted. Once the scheme has been registered, there will be a yearly reporting requirement to file an Annual Return (previously known as form 42) by the 6 July following the end of the tax year.

Reportable events range from the acquisition, to the disposal of securities, but nil returns still have to be filed even if there have been no reportable events in the year. The reporting obligation will only cease upon closure of the scheme.


The penalties

Late filing penalties have and will continue to apply for all outstanding returns since 6 July 2016. The penalties are as follows:

  • Initial late filing penalty – £100
  • 3 months late – additional £300
  • 6 months late – additional £300
  • 9 months late – additional £10 per day

On top of this, a penalty not exceeding £5,000 could be imposed by HMRC if an Annual Return is found to contain a material inaccuracy which is careless or deliberate, or is not corrected after the company becomes aware it is incorrect.

With such significant penalties payable, employers with such schemes or arrangements should take extra care that this reporting requirement is complied with within the admittedly short three-month reporting window.

If you have an existing ERS scheme and would like us to help, please get in touch with your usual Forbes Dawson contact.




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