The draft Finance Bill 2014 will make a number of changes to the approval process and operation of employee share schemes which may impact upon your business. In particular, companies will be required to self-certify that their employee share schemes comply with the legislation rather than seeking prior approval from HMRC. There is also a move towards electronic notification to HMRC of the establishment of employee share schemes and online filing of annual employee share schemes returns.
- “Self-certification” of CSOPs, SIPs, and SAYE option schemes from April 2014
- Online notification of new and existing schemes
- Online filing of annual share schemes returns
- Online notification of the grant of EMI options
From 6 April 2014, companies who establish new CSOP, SIP and SAYE option schemes will be required to self-certify that their schemes meet the relevant legislative requirements. Formal HMRC approval will no longer be given in respect of new schemes: however, companies may still apply for a non-statutory clearance from HMRC if they remain uncertain about HMRC’s interpretation of the recent tax legislation.
Companies must then notify HMRC of the adoption of such schemes and declare that they meet the relevant requirements. Notification must be done online and given by 6 July 2014 following the end of the tax year of implementation of the schemes.
Companies must also confirm, upon notification to HMRC, that the purpose of the scheme(s) is to provide shares or option benefits to employees in accordance with the relevant legislation and in particular, that the scheme(s) will not provide cash to employees as an alternative to shares.
For existing HMRC-approved schemes, companies must also notify HMRC online of the continued operation of existing schemes (both approved and unapproved) by 6 July 2015 – if this is not done, these schemes will lose their tax advantages.
Online filing of annual returns
From 6 April 2015, it will become mandatory for all employment-related securities returns (such as Form 34 for SAYE and Form 35 for CSOP) to be filed online. HMRC will no longer issue notices or reminders to file returns. The deadline for filing any return will be 6 July 2014 following the end of the tax year in question and automatic penalties will be applied for late filing from 7 July 2015. HMRC may issue a penalty of up to £5,000 if returns are not made electronically.
Grant of EMI options
Form EMI1, which notifies of the grant of an EMI option, will need to be submitted online in respect of EMI options granted on or after 6 April 2014. Companies must provide to the employee, and keep a copy of, the declaration made by the employee that he meets the working time requirement. Companies will be required to produce this declaration within 7 days of any request to do so by HMRC. Existing unexercised options will also need to be registered with HMRC from this date.
Do it online
Companies must be registered for HMRC taxes and signed up for online services in order to comply with the new requirements. The Employment Related Securities online service will then be accessible through the PAYE Online for Employers service.
What action should be taken?
The following dates should be noted:
6 April 2014
- online notification of new and existing share schemes begins
- online notification of EMI options (existing unexercised options and new grants) must be made from this point
6 April 2015
- filing of employment related securities returns must be done online
6 July 2015
- online notification of existing share schemes deadline
6 July 2015 onwards
- annual return information must be submitted by 6 July following the end of the relevant tax year
The new processes being proposed will mean that companies will be able to implement CSOP, SIP and SAYE schemes more quickly and efficiently than before. However, they will remove the comfort and certainty which formal HMRC approval provided. Companies will need to take even greater care than before to ensure that the schemes comply with the relevant legislation. It is also imperative that any existing schemes are notified to HMRC by 6 July 2015 if the tax benefits are to be preserved.
Please do not hesitate to contact a member of the DWF share schemes team if you have any queries regarding the new proposals or would like assistance in complying with them.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.