There are steps employers can take now to plan ahead of the reporting deadline and avoid last minute issues.
Against a backdrop of on-going HMRC employer compliance reviews, extensively targeting a wide demographic of employers, it is important to assure the accuracy of return filings. Early preparation also means more chance to ensure correct end of year payroll withholding where required and allows any historic failures unearthed to be proactively managed via voluntary disclosure.
Year-end employee share plan reporting involves three key tasks:
Each new tax advantaged share plan – that is Save As You Earn (SAYE) plans, Company Share Option Plans (CSOPs), Share Incentive Plans (SIPs) and Enterprise Management Incentive (EMI) plans – must be registered individually.
Other plans (including overseas plans with UK participants) may be registered individually or included under a single registration.
Certain events that occur outside a formal employee share plan, such as an ad-hoc acquisition of shares or grant of an option on a change of control or other transaction, can also give rise to reporting obligations and might need to be registered as a ‘plan’.
It is crucial that SAYE plans, CSOPs and SIPs established in 2018/19 are registered on ERS Online Services before 7 July 2019. Each grant of EMI options must be reported to HMRC within 92 days, meaning new EMI plans must be registered with HMRC within 92 days of the first grant of options.
Unless the employer has a reasonable excuse, late registration of a new SAYE plan, CSOP or SIP means that the plan will only qualify for income tax relief from 6 April 2019. This means that awards granted in 2018/19 would not qualify for tax relief (i.e. they would be treated as non-tax advantaged awards, as would late notified EMI option grants).
HMRC uses information provided in the annual returns to identify any errors in:
Employers must therefore be confident not only that the information provided in the annual returns is complete and correct, but that it is consistent with their payroll and corporation tax compliance positions.
Share awards held by Internationally Mobile Employees (IMEs), where the reporting, payroll and corporation tax requirements are not perfectly aligned, can present particular challenges.
Completing the annual share plan returns is a good opportunity to confirm that the payroll compliance is accurate and, in particular, that PAYE due on share awards has been made good in full by employees to prevent additional ‘tax on tax’ charges arising.
An automatic penalty of £100 per plan registration will arise in relation to a late submission.
Additional penalties arise where submissions remain outstanding by 6 October 2019 (an additional £300) and 6 January 2020 (a further £300).
Further penalties of £10 per day can be imposed if a return has not been submitted by 6 April 2020.
A penalty of up to £5,000 can be imposed in respect of material inaccuracies in returns which are careless, or which are not corrected without delay.
HMRC will accept share plan returns for 2018/19 only from 6 April 2019. However, there are practical steps employers should consider taking now to get ready:
KPMG can assist employers to complete and submit plan returns, review their payroll and corporation tax compliance processes for employee share plans and confirm tax-advantaged plans’ qualifying status.
If you have any queries, or would like to discuss how KPMG can assist you, please get in touch with your normal contact or email firstname.lastname@example.org