HMRC's latest Employment Related Securities (ERS) Bulletin contains some handy tips. Here is our enhanced version.

Non-statutory clearance process

  • Self-certification of employee share schemes and arrangements commenced in April 2014. This saw the removal of the Statutory or Non-statutory approval or clearance procedure previously provided.
  • Where advice is required in relation to changes to or proposed transactions in employee share schemes and arrangements for which you consider there is no clear guidance or you are uncertain about HMRCs interpretation of the legislation you should use the Non-statutory clearance guidance.
  • If you have an allocated Customer Relationship Manager then all Non-statutory clearance requests should be sent directly to them.

See HMRC Tax Clearance Guidance

Use of “Catch all” rules

  • Where companies operate a main share scheme and create a sub plan to operate a tax advantaged scheme, for the sub plan to be a qualifying tax advantaged scheme, it must meet the specific requirements of the relevant legislation.
  • To achieve compliance with the legislation some companies have been using catch all rules, e.g. by stating that any rules of the main plan which would jeopardise the tax advantaged status of the sub plan do not apply to the sub plan.
  • Companies must make sure the sub plan scheme rules are clear and define which rules of the main plan will apply. Using a catch all rule may result in the scheme being viewed as non-qualifying.

Enterprise Management Incentives (EMI)

Notifying replacement options:

  • When EMI replacement options are granted, the replacement options must be notified within 92 days using ERS.

Notifying errors within 9 months of notification being given to HMRC:

  • Employers have 9 months of the date that the original notification was given to HMRC to let them know if they identify errors in EMI options already granted.
  • To notify corrected options after the 92-day deadline you need a reasonable excuse code from HMRC. The code allows you to re-notify corrected options (outside the 92 day deadline).
  • You must then cancel the originally issued incorrect options when you complete and file your ERS annual return.

Options granted between 6 April 2018 and 15 May 2018:

  • HMRC will treat share options granted between 7 April 2018 and 15 May 2018 (the period when EU state aid approval was pending) as continuing to receive the tax advantages offered by EMI.
  • HMRC will waive the 3 year limit in relation to any cancelled options should a company which issued EMI options during this period wish to cancel them and start again.

Options capable of exercise after a person’s death:

  • If the intention is for the EMI option to be capable of being exercised after the person’s death, this provision must be written into the EMI option agreement at the date of grant.
  • To add this provision after the date of grant would treated as a fundamental change. This results in the option being re-granted with resulting consequences, e.g.notification of grant to HMRC.
  • Option agreements which allow for options to be exercised for a longer period than 12 months after a person’s death, do not meet the requirements of the legislation to be qualifying EMI options.
  • See EMI: Enterprise Management Incentives

Share Incentive Plans (SIPs) and Stamp Duty

  • As announced at Budget 2018, the government will, in Finance Bill 2019, make a minor amendment concerning Stamp Duty and Stamp Duty Reserve Tax relief for SIPs which will have effect from 6 April 2014.
  • This puts the legislation onto the basis already operated and confirms that the existing and long standing Stamp Duty relief for SIPs continues to apply.

Common return errors identified

The most common return errors are:

  • using drag and drop to fill in the return templates like the PAYE reference column where Excel then applies an auto increment.
  • entering outdated or incorrect PAYE reference numbers
  • not using pounds currency in the return template so the price paid to acquire the shares is an inflated value

ERS penalties

HMRC estimates that the number of penalties issued based on a 2017 to 2018 ERS return not being filed is:

  • 1st penalty: 9,253
  • 2nd penalty: 6,014
  • Penalty appeals: 1,000

HMRC asks all companies to check they have filed a return and that their address, and contact details are correct.

HMRC’s most common ERS issues and top things to remember

  • Make sure you include the relevant share scheme reference number if you have one when contacting HMRC share schemes or your post may have to be returned by HMRC.
  • The number will not have been sent an email, fax or letter, you must check for the number online in ‘view schemes and arrangements’.

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