Employee share plan reporting 2021/22

Employers must report certain events concerning employment-related securities and options to HMRC each year. This involves two key tasks: registering any new employee share plans or other arrangements with HMRC and submitting returns disclosing any reportable events (or a ‘nil’ return where no report is due). Automatic penalties arise on late submissions, and a penalty of up to £5,000 can be imposed for any material inaccuracies that are careless, or which are not corrected without delay. This article outlines the share plan reporting obligations, how these interact with other employer compliance, and what employers can do now to get ready.

What are the deadlines?

Any share plans or other arrangements involving employment-related securities or options, established during 2021/22 should be registered with HMRC in time for the necessary returns to be filed on or before 6 July 2022.

For new tax-advantaged Save As Your Earn (SAYE) plans, Company Share Option Plans (CSOPs) and Share Incentive Plans (SIPs), late registration without a reasonable excuse can mean that only awards made from 6 April 2022 can qualify for income tax relief. It’s therefore crucial that any such new plans are registered with HMRC by the deadline.

Tax-advantaged Enterprise Management Incentive (EMI) plan registration and option grants must be reported to HMRC within 92 days of options being granted to qualify for tax advantages. In addition, an annual return needs to be filed by the 6 July deadline, albeit this will be a nil return if the only action has been an EMI grant already notified.

Arrangements without UK tax advantages, such as overseas share plans with UK participants (including those with overseas tax advantages), can be registered individually or included under a single registration. Some events outside a formal employee share plan must also be reported and might need to be registered with HMRC as a ‘plan’ (these include one-off share awards, and acquisitions of shares or options on a change of control or other transaction).

Should your employee trusts register too?

Employee trusts, including those established to operate employee share plans, have been required to register with HMRC’s Trust Registration Service (TRS) since June 2017, if they incur certain UK tax liabilities (e.g. Stamp Duty Reserve Tax on making an unconditional agreement to acquire shares in a UK registered company). However, some employee trusts without a relevant UK tax liability might now be required to register with the TRS by 1 September 2022. This separate reporting obligation is discussed in more detail in our earlier article.

Interaction with other employer compliance issues

HMRC can use the annual share plan returns to check:

• PAYE and NIC operated on share awards;
• Corporation tax relief claimed on employee share acquisitions; and
• Employees’ self-assessment returns.

Employers should therefore ensure that their annual returns are complete, correct and consistent with their payroll and corporation tax compliance positions.

As part of overall year-end employer compliance, completing the annual share plan returns is therefore an opportunity to confirm that payroll compliance is accurate, and that employees have ‘made good’ PAYE due on share awards to prevent additional ‘tax on tax’ charges arising.

Share awards held by internationally mobile employees, where the reporting, payroll and corporation tax requirements are not completely aligned, can present difficulties.

Identifying and correctly reporting ‘cash cancelled’ and ‘net settled’ awards – where employees acquire cash rather than shares in respect of some or all of the award which can affect the corporation tax position – can also be challenging.

What should employers do now?

Employers can get ready for this year’s share plan reporting and, where required, begin the registration process (ideally before the end of April), by asking the following questions:

• Were any new plans or other arrangements which must be registered established in 2021/22?;
  
• Were changes made to existing SAYE, CSOP, SIP or EMI plans and, if so, did these affect their tax-advantaged status?;
• Do we understand how our share plans operate, for example:
  •  If our plan provides for both ‘Restricted Stock Units’ and ‘Restricted Stock Awards’, do we understand the distinction?;
  • Are the shares acquired subject to restrictions (this is common in private companies and continental European plans)?; and
  • Are our awards ‘cash cancelled’ or ‘net settled’ (and if so, how does this affect our UK corporation tax relief position)

• Which reportable events have occurred, and which stakeholders (e.g. human resources, payroll, tax, legal, company secretarial) hold the relevant data?; and
• Is the information required to report accessible and robust, particularly in relation to mobile employees?

As in 2020/21, mobile employees who were internationally displaced by the coronavirus outbreak could cause unexpected UK PAYE or NIC obligations (e.g. if they unexpectedly established UK tax residence or had more UK workdays than anticipated). Employers should review their mobile workforce carefully, identify any such exposures, and determine how these should be addressed.

For further information please contact:

• Liz Hunter
• Lorna Jordan