When are the returns due? ERS returns for 2019/20 should be filed on or before 6 July 2020. However, in an article published in its Employment Related Securities Bulletin on 8 June, HMRC stated that it would consider companies have a ‘reasonable excuse’ for late submission if they are prevented from filing on time by the Covid-19 outbreak.
This confirmation is welcome, but employers should note HMRC has not given an open-ended extension to the filing deadline. Where employers are able to do so, they should file their ERS returns by the statutory deadline. Companies that consider they have a reasonable excuse for late filing due to Covid-19 will need to explain to HMRC how the outbreak affected them when appealing the automatic late filing penalty.
What should the focus be?
Subject to the special considerations this year due to Covid-19, there are a number of issues employers should consider as the filing deadline approaches:
if you have not yet registered your share plans then do so urgently, as this can take time and may delay filing;
identify the relevant stakeholders in the business (HR, payroll, tax, company secretarial, legal) and collate the data required to complete the forms; and
review that data, identify reportable events and any areas where further information is required.
allocate enough time to complex reporting requirements as detailed below.
What are the challenges?
It’s important that annual returns are accurate, as HMRC will use them to identify any errors in:
PAYE and NIC operated on share awards;
corporation tax relief claimed in relation to employee share acquisitions; and
employees’ self-assessment filings.
The annual return process also provides a cross check of the annual payroll compliance and helps identify and correct any errors in order to minimise the likelihood of penalties and additional tax charges arising.
Unless you have a reasonable excuse, automatic penalties will be incurred if you fail to register or file on time, and awards granted under tax advantaged plans could potentially lose their tax benefits.
Certain aspects of share plan reporting can be complex. These are set out below.
Internationally mobile employees (IMEs)
It is important to identify the IME population to ensure returns are accurate. This includes assignees as well as permanent movers both to and from the UK. It is important to capture the entire population and confirm awards have been taxed appropriately. Where not, the position should be disclosed to HMRC and corrected.
Net settled awards
Identifying awards that were ‘net settled’ by paying cash in relation to the payroll withholding due and settling only the ‘net’ award in shares is crucial. Awards that were net settled need to be reported as two separate entries to reflect the net number of shares acquired and the cash payment received.
Net settling share awards will reduce the statutory corporation tax relief available. Whether awards are net settled can sometimes be difficult to determine and specialist advice might be required.
Transactions
Where these involve the acquisition of a new company or a merger with another company, they are likely to give rise to significant additional transactions to report.
Share plan reviews
It is advisable to review share plans that were adopted or amended in 2019/20 to determine the specific reportable events, which section of the ERS return needs to be completed and the statutory corporation tax relief available.
Lorna Jordan & Liz Hunter, KPMG (KPMG’s Tax Matters Digest)
Home >Articles > Employee share plan reporting 2019/20
Employee share plan reporting 2019/20
When are the returns due? ERS returns for 2019/20 should be filed on or before 6 July 2020. However, in an article published in its Employment Related Securities Bulletin on 8 June, HMRC stated that it would consider companies have a ‘reasonable excuse’ for late submission if they are prevented from filing on time by the Covid-19 outbreak.
This confirmation is welcome, but employers should note HMRC has not given an open-ended extension to the filing deadline. Where employers are able to do so, they should file their ERS returns by the statutory deadline. Companies that consider they have a reasonable excuse for late filing due to Covid-19 will need to explain to HMRC how the outbreak affected them when appealing the automatic late filing penalty.
What should the focus be?
Subject to the special considerations this year due to Covid-19, there are a number of issues employers should consider as the filing deadline approaches:
if you have not yet registered your share plans then do so urgently, as this can take time and may delay filing;
identify the relevant stakeholders in the business (HR, payroll, tax, company secretarial, legal) and collate the data required to complete the forms; and
review that data, identify reportable events and any areas where further information is required.
allocate enough time to complex reporting requirements as detailed below.
What are the challenges?
It’s important that annual returns are accurate, as HMRC will use them to identify any errors in:
PAYE and NIC operated on share awards;
corporation tax relief claimed in relation to employee share acquisitions; and
employees’ self-assessment filings.
The annual return process also provides a cross check of the annual payroll compliance and helps identify and correct any errors in order to minimise the likelihood of penalties and additional tax charges arising.
Unless you have a reasonable excuse, automatic penalties will be incurred if you fail to register or file on time, and awards granted under tax advantaged plans could potentially lose their tax benefits.
Certain aspects of share plan reporting can be complex. These are set out below.
Internationally mobile employees (IMEs)
It is important to identify the IME population to ensure returns are accurate. This includes assignees as well as permanent movers both to and from the UK. It is important to capture the entire population and confirm awards have been taxed appropriately. Where not, the position should be disclosed to HMRC and corrected.
Net settled awards
Identifying awards that were ‘net settled’ by paying cash in relation to the payroll withholding due and settling only the ‘net’ award in shares is crucial. Awards that were net settled need to be reported as two separate entries to reflect the net number of shares acquired and the cash payment received.
Net settling share awards will reduce the statutory corporation tax relief available. Whether awards are net settled can sometimes be difficult to determine and specialist advice might be required.
Transactions
Where these involve the acquisition of a new company or a merger with another company, they are likely to give rise to significant additional transactions to report.
Share plan reviews
It is advisable to review share plans that were adopted or amended in 2019/20 to determine the specific reportable events, which section of the ERS return needs to be completed and the statutory corporation tax relief available.
Lorna Jordan & Liz Hunter, KPMG (KPMG’s Tax Matters Digest)
