We recommend filing your annual returns online via HMRC’s Employment Related Securities (ERS) Service as soon as possible to avoid any penalties being incurred.
All companies who have registered an employee share scheme with HMRC have an ongoing legal obligation to file an annual return against the scheme following the close of each tax year in which it remains active. This includes both HMRC tax-advantaged share schemes such as EMI, CSOP, SIP and SAYE and any non tax-advantaged or 'unapproved' schemes or arrangements. Each registered share scheme requires a separate annual return.
All 'reportable events' that have taken place during the last tax year must be notified to HMRC on the annual return. This includes (but is not limited to) the grant of new options; any adjustments made to existing option terms; the release, lapse or cancellation of options i.e. in the event an employee has ceased employment with the company or other disqualifying events; and the taxable or non-taxable exercise of options during the previous tax year.
The matters to be reported will differ depending on the type of scheme or arrangement you currently operate and if you have any questions in relation to 'reportable events' we can help.
If there has been no activity in the previous tax year or there are no outstanding options under a registered scheme, you will be required to file a ‘nil return’.
You should consider taking steps to close any registered scheme if there are no existing options in issue and no further options are likely to be granted under the scheme in the future. This would avoid the administrative burden of filing an annual return for each year the scheme remains inactive or incurring any financial penalty for non-compliance if the obligation to file a return is not complied with.
The submission of annual returns can either be carried out by the company directly or by an agent appointed by the company to act on its behalf. The Birketts Employee Incentives team can file ERS annual returns for you so please do be in touch if this would be of interest to you.
For further information or assistance regarding online submission of ERS annual returns, please contact Kirsty Scripps in our Employee Incentives Team.
Does your current share scheme remain ‘fit for purpose’ in a post-COVID world?
As lockdown restrictions begin to ease and companies start to make plans for the future of their business in a post-COVID world, it may also be a good time to reflect on your current share scheme to assess whether it remains fit for purpose in the wake of the pandemic.
- Do performance-related targets set prior to the pandemic remain achievable in order to properly incentivise your key employees?
- If the exercise of share options was contingent upon a sale of the business in the short to medium term, does this remain a realistic prospect?
- Do the terms of the scheme need to be re-aligned to fit new business objectives?
We can help. To discuss further please contact Lisa Hayward, Head of Employee Incentives.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2021.