Help – I have received a penalty from HMRC
Employers who have awarded shares or options to their employees have an annual obligation to report any notifiable events that occurred in relation to Employment Related Securities (ERS), often known as a share scheme return. The absolute deadline for making the share scheme return via HMRC’s ERS system was 6 July.
What are the penalties?
It’s around about now that HMRC’s ERS penalty letters start dropping onto the doormats of those who for whatever reason may have been less prepared and missed the filing deadline. The initial penalty for missing the filing deadline is £100. An additional penalty of £300 is due if the ERS return is not submitted by 6th October, with another £300 if the return remains outstanding on 6th January.
However, penalties can in some circumstances be much higher (up to £5,000) if for example your return contains a material and deliberate inaccuracy, and you don’t correct it.
How do I get my share plan return right?
Whether you’re dealing with your own returns or whether you have professionals to help you, it’s important to keep detailed records – including dates and prices – to make sure you can complete the returns accurately and on time, so avoiding unnecessary penalties. People tend to remember the common actions taken during the year such as an exercise of options, but in some cases you may need to check individual rules and option agreements to identify the impact of events on the participants, the workings of the scheme and ultimately what is/isn’t reportable.
Have you considered if there have been changes to participants’ employment status or working arrangements? Have any participants changed status from non-employee to employee? Have there been changes in the Company’s share capital or ownership – even smaller changes such as an investment by a third party, or an internal reorganisation of a group? If the answer to any of these is yes you may have options lapsing, or ceasing to qualify under the plan they were granted under and these may result in changes required when reporting.
Our advice is always to keep good records throughout the year, which eases the returns process as the deadline approaches. This is particularly important as at present HMRC’s system doesn’t allow the submission of an “early” return – so, for example, if your company is sold and options exercised at the end of April 2024, you will not be able to complete and submit the return until the window opens for returns almost a year later in April 2025.
Our specialist share scheme support service
RM2 has a dedicated Compliance team who use bespoke software to keep on top of our client’s share plan records. Supported by knowledgeable share plan solicitors we know the right questions to ask at the right times and can advise you how best to manage your share plan reporting obligations.
This year, we’ve completed and filed over 150 share scheme returns for our clients, covering a wide range of UK tax-advantaged share plans including Enterprise Management Incentives, Company Share Options Plans and Share Incentive Plans. (all of which must be registered and filed separately). We also filed returns for our clients non-tax advantaged share plans such as Growth Share Plans, Deferred Share Purchase plans and a myriad of bespoke arrangements which also fall under the category of being non-tax advantaged, but still essential to our clients’ equity incentive arrangements.
Need help?
So if it’s help submitting a single return because you have received a penalty, to needing share plan administration and compliance services on an annual basis, or even getting that long promised health check on your existing share plans, drop us a line at enquiries@rm2.co.uk to arrange a free call with one of the team.
