Annual return filing for EMI and non-tax advantaged share option schemes

Tuesday 20th June, 2023

It’s time to review your company’s share option scheme(s) and get ready to file the annual return by midnight 6 July to avoid late-filing penalties.

This is important if your company has granted EMI (tax advantaged) or non tax-advantaged options. This applies not only to independent UK companies but also to US companies that have set up a share option scheme (a “UK sub-plan”) for the employees of their UK subsidiaries.

Here are the key steps you need to take and common questions and answers on what you need to do.

When is the deadline for filing the annual return for 2022/2023 tax year?

The deadline for submitting a 2022/2023 tax year annual return is midnight, 6 July 2023.

Who is responsible for the annual filing?

The company is responsible for complying with the reporting obligations.

The company may appoint an agent to deal with this process on behalf of the company. An agent must also be registered with HMRC to be able to complete the filing and this registration process can take up to two weeks.

In the case of a share option scheme set up by a US parent for the UK employees of its UK subsidiary, the responsibility for annual filing lies with both the UK employer and the US parent who would issue the relevant option shares under the scheme. It would be important for the US  companies to ensure that the UK subsidiary is aware of, and is able to deal with, the reporting process in good time.

Who do I need to know before filing the annual return?

If the company is required to make the annual return filing in relation to a share option scheme, the scheme will need to be registered with HMRC before the annual return is filed.

To register the existence of a scheme, you will need to create a Government Gateway user ID and password. New share option schemes are registered through ERS online portal at: https://www.gov.uk/employment-related-securities-files. Once registered, the share option scheme will be allocated a unique scheme reference number.

It can take up to 7 days for HMRC to approve the registration and to allocate a unique scheme reference number to the scheme, so this step must be completed in good time and well before the 6 July 2023 annual return deadline. If the scheme has not yet been registered, we recommend that you ensure this step is completed as soon as possible. If the company has more than one share option scheme, each scheme may need to be registered.

Is my company required to register an EMI share option scheme?

If the company has already granted options under an EMI share option scheme, the scheme should have already been registered with HMRC and allocated a unique scheme reference number. If this is the case, then you do not need to go through the scheme registration process described above and you can proceed with submitting the annual return before 6 July 2023.

If the company set up an EMI share option scheme but did not grant any options during the 2022/2023 tax year, although there is no legal requirement to register such scheme until an option has been granted, HMRC expects all new tax-advantaged schemes to be registered by 6 July 2023. Accordingly, it would be prudent to register a new EMI share option scheme that was set up during the last tax year and file the annual return by 6 July 2023.

Is my company required to register a non-tax advantaged scheme?

If the company has set up a non-tax advantaged share option scheme and a reportable event has occurred in connection with the scheme, (please refer to the guidance below entitled “What needs to be included in the annual return” for what constitutes a reportable event) the scheme must be registered and annual return filed with HMRC before 6 July 2023. Please refer to the above
guidance entitled “What do I need to know before filing the annual return?” for the registration process.

According to HMRC’s guidance, if no reportable event has occurred in relation to your non-tax advantaged scheme, there is no need to register the scheme, but you may want to consider if it is still worth registering to facilitate any future annual reporting.

How is the annual return filed?

The annual return must be filed online via ERS online portal at: https://www.gov.uk/employment-related-securities-files. The company or the company’s agent will need to use the Government Gateway user ID and password set up when registering the share option scheme to log into the service to complete the filing.

What needs to be included in the return?

An annual return must include all reportable events that have taken place during the last tax year in connection with a share option scheme. A reportable event includes any allotment and issue
of option shares to employees, the grant, exercise, release, lapse, rollover, adjustment and/or cancellation of options to employees, and/or the close of a share scheme (for example as part of a company sale). There may be other events that could be treated as reportable events, and we would recommend that you consult your advisers if in doubt.

HMRC provides template forms that you can download and complete to submit the necessary information as part of your annual return. The templates (including for a nil return) and additional guidance notes can be found here: https://www.gov.uk/guidance/submit-your-employment-related-securities-ers-return.

It is strongly recommended that you take screen captures at each stage of the filings that are completed for your records. HMRC is currently not able to provide copies or evidence of the information that you file online.

For all share option schemes, if the company’s scheme was previously registered with HMRC but there has been no activity and therefore no reportable event (i.e., nothing has happened) during the 2022/2023 tax year, then you should still file a nil return.

If you need help please get in touch

We have a dedicated team ready to answer any questions about your reporting obligations.

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