Employee share plan returns – are you ready to file?

HMRC is now ready and waiting for your employee share plan annual returns.  However, they won’t remind you to file your return – it’s down to you to remember and file in time.

If you’ve granted options or given shares to your UK employees, you must file a return on HMRC’s Employment Related Securities portal by 6 July 2024.  If you don’t, you may be subject to late filing penalties.

Here’s a quick guide to the annual share plan return process.

1  My first share plan award was made in the tax year ending on 5 April 2024.  What should I do?

You will need to register your share scheme with HMRC before you can file a return. 

Most tax-advantaged share plans (Company Share Option Plans (CSOP), Share Incentive Plans (SIP) and Save As You Earn (SAYE) schemes) must be registered by 6 July following the tax year in which the first awards were made.  If you do not register your scheme by the deadline, awards made under the scheme may not qualify for the beneficial tax treatment.

If you granted options under an Enterprise Management Incentive plan (EMI) before 6 April 2024, you should have notified HMRC within 92 days of the date the options were granted.  If you have not done this, the EMI options will not qualify for the tax benefits you and your employees expect.  Please contact us if you’re unsure if you’ve registered your EMI options in time.

Non-tax advantaged schemes (eg Growth Share Plans, Long Term Incentive Plans (LTIPs), and Non-Tax Advantaged Share Option Plans (NTAs) must also be registered by 6 July following the tax year in which first awards are made. 

2  How do I register or notify HMRC of my share plan?

You will need to register on HMRC’s Employment Related Securities (ERS) online system.  This is linked to the existing PAYE Online service. 

If you are already registered for this, you can sign in and add the ERS portal.  You can then register your scheme and file your annual return.

If you are not registered, you will need to register for the PAYE Online service.  HMRC will send you an activation code by post.  This can take up to two weeks, so you should take care to start the process in good time so as not to miss the deadline.

Please note that you cannot delegate this process to an agent. 

3  What share plans require an annual return?

You’ll need to file a return if you operate any of the tax-advantaged employee share plans or non tax advantaged arrangements noted above.

If you have just given shares or options to an employee, you will need to file a return even if the arrangements aren’t operated under a formal set of rules. 

4  I’ve given some shares to a non-executive director, but he’s not an employee. Do I have to file a return?

Yes.  You must also file a return for any awards made to any “officeholders” in the company, even if they’re not an employee.  That includes non-executive directors.

5  I haven’t made any new grants under my share plan this year, and nobody has exercised or ceased employment

Even if there has been no activity relating to your share plan, you must still file a nil return to avoid a fine. 

6  What information do I need to provide?

You must notify HMRC of all awards granted, lapsed and exercised, including relevant dates.  You may also need to tell them the reasons for employees ceasing employment, and the value of the shares at the time of an event. 

You’ll also need to let them know if options were exercised or shares sold as part of a company sale – in which case you may also need to let HMRC know that the scheme has been wound down. 

If you’re running a tax advantaged plan you will need to confirm if any alterations have been made to key feature of a share plan.

7  How do file the annual return?

You will need to upload the information onto the Employment Related Securities portal, using the login details that you used to register your plan.

You need to make sure that the information is uploaded in the right format, so it matches HMRC’s systems.  HMRC have made some changes to their templates this year (see our blog here), so make sure that you’re using the correct templates or you won’t be able to file your return.)

8  What if I don’t file a return?

You will be fined if you don’t file in time.  The filing penalties are as follows:

• Failing to meet 6 July deadline: £100
• Return outstanding on 6 October (3 months late): a further £300
• Return outstanding on the following 6 April (6 months late): a further £300
• Ongoing filing penalties can be charged at a rate of £10 per day.

Furthermore, if you fail to file your share plan returns in time, HMRC may see this as evidence of a failure to report other information.  This could lead to enquiries or investigations from HMRC into other parts of your business. 

9  I missed the deadline because I was on holiday. 

HMRC will accept certain “reasonable excuses” for late filing, but these are very limited (eg serious illness, fire and flood, death). 

The ERS portal can become overloaded towards the 6 July deadline.  You are strongly advised to file your return in good time rather than leaving it to the last minute!

How can we help?

We are one of the few share schemes practices who can both design and implement your share plan, and also deal with your share plan annual returns for you.  The majority of our clients choose to engage us to administer their schemes after implementation. 

Each year, RM2 files well over 150 share plan returns for our clients – so you can be assured of our experience and expertise in this area.

If your share plan return is causing you stress and eating into your time, we can make it less of a headache for you.  Just email our Operations Manager, Caroline Parker (caroline.parker@rm2.co.uk) and she will be happy to discuss your requirements.