HMRC’s 6 July deadline approaches for filing annual share plan returns

The Revenue has published a reminder to those companies operating an employee share scheme or arrangement that they must file an annual return with HMRC on or before the deadline of 6 July 2024 for the 2023/2024 tax year. It is a strict deadline and companies will not receive a reminder from HMRC to file their returns. 

The warning was spelt out in HMRC’s Employment Related Securities Bulletin 54 which also made reference to changes affecting Company Share Option Plans (CSOPs) and Enterprise Management Incentives (EMI) options. 

The CSOPs options limit doubled from £30,000 to £60,000 from 6 April last year. To reflect that change HMRC has published guidance and technical notes and they have updated the end of year template and submission checking service. The Revenue says: ‘This means you can prepare to use the new template or use the guidance and technical notes to generate your own template ready to submit your end of year return.’

As for EMI options, in recent times the government has made changes to simplify the process to grant options under the EMI scheme. One of the changes applies to EMI options granted on or after 6 April 2024 where the Revenue has extended the time limit for a company to notify HMRC of the grant of an EMI option.

So, let’s hear more about all of those changes. Earlier I caught up with share plans specialist James Sullivan Tailyour who joined me by video-link from London. First, that annual filing deadline in July: 

James Sullivan-Tailyour: “So 6th July is a key date. Many companies will be familiar with this because it's the regular date on which companies have to report via the HMRC’s prescribed annual return, the grant, exercise, cancellation, or lapse of any form of what HMRC call an ‘employment-related security’. So that includes EMI options, CSOP options, Share Save Options, any form of tax advantaged or non-tax advantaged share option or form of equity security. Any reportable event such as a grant, or an exercise, needs to be included in the annual return for the previous tax year, so the 2023 24 tax year in this instance, and that return is due by 6th July, same as every year, and I expect many companies are already in the process of gathering all the information that they need to submit the return, but if you're not if this is a reminder to get started on that. The usual penalties apply for failing to make the annual return within the prescribed deadline. It’s also worth bearing in mind that if you've previously registered some form of employment related securities arrangement with HMRC and you haven't told HMRC that that arrangement has been terminated, you do still need to file an annual return even if no reportable events have occurred in the relevant tax year. You just need to submit a nil return but, nevertheless, you do need to submit it.”

Joe Glavina: “I gather there have been some changes in the way in which EMI options are now reported when they are granted. What are they?”

James Sullivan-Tailyour: “So previously, options granted before 6 July 2024 used to have to be notified to HMRC within 92 days of their grant otherwise the tax advantage status failed to attract the EMI options. For EMI options granted on or after 6 July 2024 that regime has changed and you now have to report the grant of the EMI options before 6 July following the end of the tax year in which the grant occurs. So it's aligned to the filing deadline for your annual return. Now that 6 July filing deadline is important. If you don't notify HMRC of the grant of EMI options by 6 July following the end of the tax year in which the grant occurs, your EMI options will not be tax advantaged unless HMRC approve a reasonable excuse claim. So if you've granted EMI options post 6 July 2024, you will need to notify HMRC or the grant of those by 6 July 2025. So there's still quite some way off but what we are advising companies is that they nevertheless treat that previous 92-day filing requirement as if it was still live and basically notify HMRC of the grant of EMI options as soon as possible and not wait until the 6 July deadline because the chances are you'll miss it, you'll forget about it, or you'll remember on 5 July and you won't have the details to handle to make the notification within the prescribed timeframe and the consequences of failing to make that notification are quite draconian and you could potentially lose your tax advantaged status of your EMI options. So don't forget about that important change and make that notification as soon as possible would be our advice.”

Joe Glavina: “I see that HMRC’s ERS Bulletin flags some guidance and technical notes reflecting the change to the CSOP share options limit. That limit increased from £30,000 to £60,000 last year, 6 April 2023, but again, it’s something you’re reminding clients about.” 

James Sullivan-Tailyour: “Yes, I feel that people may have noticed something at the time, some publications from HMRC or law firms, but have perhaps put it on the back burner but it's a useful reminder that the maximum value of shares that can be granted under a tax advantaged CSOP option doubled with effect from 6 July 2023 from £30,000 worth of shares to £60,000 worth of shares and that means that CSOP is now a more attractive alternative, potentially, for those companies that have outgrown EMI, no longer qualify to grant tax advantaged EMI options, but are looking for ways to deliver share options to their employees in a tax efficient manner. If that's the case, then this change to the CSOP regime is welcome and it's a good opportunity just to remind people of that change. As of yet we haven't seen a lot of companies making the most of that increased limit and it would be great to see more companies availing themselves of that increased opportunity”

Joe Glavina: “Finally James, looking ahead to a General Election, probably towards the end of the year when we could see a change of government. How might the outcome affect employee share plans, if at all?” 

James Sullivan-Tailyour: “That’s a good question. So far as we're aware at the minute there are no specific proposals from any of the main parties, any manifesto commitments, specifically relating to employee share schemes. I'd imagine they'll have a lot in their in-tray that arguably is more important than some tinkering with the tax regime that applies to all-employee share plans. But there was last year a government consultation on the all-employee tax efficient share plans, the Save As You Earn share option scheme, and the Share Incentive Plan, the SIP, arrangements and the thrust of that consultation was about whether those regimes, which are quite old, they're at least a decade old if not older, are still fit for purpose in the modern economy, whether the shareholding periods, minimum three years before you unlock some of the tax advantage treatment, whether those are still appropriate in the modern economy. It might be the current government's sees the post-election period as a good opportunity to take those forward not least because they won't be particularly expensive proposals to implement but nonetheless could be a good way of boosting employee share ownership and all of the attendant benefits that are proven to come with that.”

Those changes which James talked about are set out in HMRC’s Employment-Related Securities Bulletin 54. We’ve included a link to it in the transcript of this programme for you.

LINKS
- Link to ERS Bulletin 54