The deadline for filing the 2018/19 ERS annual returns is only 4 weeks away. If you have not already gathered your data, you should prioritise this action now to ensure you have enough time to prepare and file an accurate return by 6 July 2019. 

What should employers focus on now?

As the filing deadline approaches, there are a number of issues employers should consider:

• If you have not yet registered your share plans then do so as a matter of urgency – this can take time and may delay filing;
• Identify the relevant stakeholders in the business (HR, payroll, tax, company secretarial, legal) and collate the data required to complete the forms; and
• Review that data, identify reportable events and any areas where further information is required. 

Allocate enough time to complex reporting requirements as detailed below.

What reporting can present challenges?

It is important to ensure annual returns are accurate as HMRC uses them to identify any errors or discrepancies in:

• PAYE and NIC operated on share based awards;
• Corporation tax relief claimed in relation to employee share acquisitions; and
• Employees’ self-assessment filings.

The annual return process can also provide a timely cross check of the annual payroll compliance, and an opportunity to identify and correct any errors in order to minimise the likelihood of penalties and ‘tax on tax’ charges arising.

If you fail to register or file on time automatic penalties will be incurred, and awards granted under tax advantaged plans could potentially lose their preferential tax treatment. 

Some aspects of share plan reporting can present particular challenges. These are summarised below.

Internationally Mobile Employees (IMEs)

Identifying the IMEs population is key to ensuring the returns are accurate. 

This includes assignees as well as permanent movers both into and out of the UK. It is important to capture the entire population and confirm awards have been taxed appropriately. Where they have not, the position should be disclosed to HMRC and corrected.

Net settled awards

It is important to confirm whether share awards were ‘net settled’ by paying cash in respect of the payroll withholding due and settling only the ‘net’ award in shares. HMRC has confirmed that share awards that have been net settled need to be reported in two separate lines on the share reporting schedules to reflect the net number of shares acquired and the cash payment received. You should also be aware that net settling share awards can reduce the statutory corporation tax relief available. Whether awards are net settled can sometimes be difficult to determine and specialist advice might be required.

Transactions

Transactions that involved the acquisition of a new company or a merger with another company are likely to give rise to significant additional share transactions to report. Companies should collate this data as soon as possible after the transaction as this can be both challenging and time consuming. 

Share plan reviews 

Do you have a new share plan or have you amended an existing share plan? If so, it would be advisable to review the share plan in order to determine the specific reportable events, which section of the return needs to be completed and the statutory corporation tax relief available.

How KPMG can help

Download our guide "Employee planned share reporting 2018/ 19" (PDF 119 KB).

KPMG can assist employers to:

• Complete and submit ERS returns;
• Review share plans to determine the applicable UK taxing legislation and the correct reporting treatment;
• Review payroll and corporation tax compliance processes to ensure they align with share plan reporting;
• Disclose and correct any payroll compliance errors identified during the annual reporting process; 
• Review reporting, payroll and corporation tax compliance processes and confirm the specific treatment of share based awards held by IMEs; 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 employersclub@kpmg.co.uk.