Correcting mistakes in EMI option information

Posted by RM2 at 08:10 on 16 Nov 2018

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We all make mistakes, and this is easily done when you’re submitting information to HMRC about your share schemes, particularly regarding Enterprise Management Incentive (EMI) options. HMRC do allow for some human error, but you need to follow their guidance when you’re correcting your information.

There is updated guidance in HMRC's latest ERS bulletin, summarised below:

Significant errors

If you’ve made what HMRC consider to be a “significant” error in your reported EMI information, you must notify HMRC by submitting a ‘reasonable excuse’ claim within 9 months of the original notification.

A significant error includes reporting the wrong number of shares under option, or stating the price of the shares wrongly.

To correct a “significant” error you need to contact HMRC to get a “reasonable excuse code” before you can submit your updated EMI notification.The following information needs to be provided to HMRC for the reasonable excuse claim:

  • date the options were granted;
  • name of the company granting the options;
  • the scheme name; and
  • the unique scheme reference number (which will have been allocated by HMRC’s Employment Related Securities service when you first registered your EMI options).

HMRC will review the reasonable excuse claim, and if agreed they will allocate a reasonable excuse code, which you will need to enter online when re-notifying HMRC of the EMI options.

Don’t forget to cancel the originally issued incorrect options when you complete and file your Employment Related Securities (ERS) annual return.

What happens if HMRC do not approve the reasonable excuse claim

On occasions HMRC may not approve the reasonable excuse claim which means the options granted are not qualifying EMI options.You then have two choices:

  1. Cancel/ renounce the original incorrect EMI Options via the next available share scheme return, and re-grant the options to the participants on the correct basis; OR
  2. Keep the options issued and register the option under a non-tax advantaged “Other” Scheme on the ERS service, by submitting an “Other” return for the correct tax year. You also need to cancel the originally issued incorrect EMI options when you complete and file your ERS “EMI” annual return.

Minor errors

If minor errors have been made e.g. a spelling error, then HMRC advise to keep a note in your records of the error that was made when the EMI option notification was submitted. You may need to produce this note if there is a compliance enquiry into your EMI options.

If you think you have fallen foul of the registration rules concerning your EMI or any of your other share schemes contact us on 0208 949 5522 or email us at enquiries@rm2.co.uk to see if we can assist you.