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Is your share scheme due a health check?

Posted on February 27, 2017

Private companies that implement share scheme are typically looking toward the long term, often intending to tie staff in with the promise of a reward based on the company’s growth over a number of years.

Like anything with a lifespan of a few years – whether that’s a car, a house or a pension plan – a share scheme needs some care and maintenance to make sure it’s still working smoothly. A failure to do so can have unfortunate consequences. In particular, if an acquisition of the company arises, the buyer is likely to perform due diligence on your share scheme, so it’s important to make sure everything is up to date and recorded correctly.
In terms of basic administration, you will need to do, or have done, the following:

When awards are made under a share scheme

  • Adopt and execute all documentation correctly, and keep copies of all relevant documentation.  A failure to execute the documents correctly may result in the options failing to qualify under the specific legislation, for example failing to qualify as Enterprise Management Incentive Options (“EMI”), or even being void under contract law. 
  • Either agree on a valuation for the options with HMRC Shares & Assets Valuation – or, if this is not possible, keep contemporaneous records supporting the value on which you based any share awards.  

After the awards are made under a share scheme

  • Register all your share schemes – whether tax advantaged or not – on HMRC’s online Employment Related Securities (ERS) portal, ensuring that each scheme type has a separate scheme reference. In case of the new EMI options must be registered online with HMRC within 92 days of the date of grant. Failure to register the options will not qualify for the beneficial EMI tax treatment. HMRC will send you a confirmation of registration – you will need to keep a record of the acknowledgement reference HMRC provides you in the final part of registering the EMI options.  
  • Check if you need to register any awards made to non-executive directors, or individuals who are directors but not employees of the company.   The definition of an employment-related security is extremely broad, and such awards are normally - and likey - need registering under ERS.


  • Keep careful records of leavers, including the reason for leaving and the date. If you have good/bad leaver rules in your share plan, consider these carefully at the time a participant leaves. Where the board can operate discretion as to whether a participant is a good or bad leaver (or on any other matter), keep records of the board’s reasoning.
  • Submit annual returns to HMRC for each plan in a timely fashion. Annual share scheme returns must be filed to HMRC even if there is no activity on the plan (a nil return) and must be filed by 6 July each year, or penalties will apply.
  • Bear in mind your share or option scheme arrangements if/when you make any changes to your company’s share capital or other corporate matters. If the company’s share capital or overall structure is changed, this may impact on your employees’ equity incentive arrangements. For EMI in particular, if the company ceases to be independent, there is likely only to be a short window of time before the beneficial EMI tax treatment falls away.
  • If you make new option grants or share awards (particularly under a tax-advantaged scheme), always check that the company and the participants qualify at the time of award. 

RM2 has administered over 1,143 share plans for over 730 different companies. If you are worried that your share plan records are not up-to-date, or if you have concerns about the way the plan is operating, we can carry out a full review of the position for you, and help with any corrective action that may be needed. Contact us on 020 8949 5522 or email operations@rm2.co.uk for more information.



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