BDO issues warning over employee share deadline

Companies with employees or directors holding shares, securities or options over shares need to register before 6th July to avoid a penalty, according to accountants BDO.

HM Revenue and Customs (HMRC) has introduced an online system for all employee related securities (ERS) covering all tax advantaged share and share option plans as well as any non-tax advantaged plans.

Failure to register appropriately or to comply with new reporting regulations could result in a penalty and the loss of any tax relief on the shares.

The changes were introduced from 6th April 2014 but the deadline for registration for new and existing plans is 6th July.

Failure to register results in an immediate £100 penalty, plus additional penalties of £300 after three and six months if their return remains outstanding. A further penalty of £10 per day can be charged if the return is more than nine months late.

Peter Gouw, tax partner with BDO, said: “This forms part of HMRC’s online services and companies must ensure they are registered if they have any employee share scheme. If companies are not already a registered user of HMRC online services, they will first need to register and create an online account with HMRC.

“Both tax advantaged and non-tax advantaged plans must be registered with HMRC. Companies will need to consider whether to register each non-tax advantaged plan separately or whether to have these all on one return. Companies will not be able to file their annual returns until the online registration has been completed.

“Companies need to self certify that they continue to meet the legislative requirements of their HMRC tax advantaged share plans. This replaces the previous system where companies could rely on HMRC approval that their plans (CSOP, SIP and SAYE) complied with the relevant law. Tax advantaged plans risk having their status removed (and tax benefits lost) if companies fail to register online, self certify and file their returns on time.

“A return must be submitted for every share plan registered even if it is a nil return. HMRC will no longer issue notices to file or reminders.”

Mr Gouw added: “Penalties of up to £5,000 can also be applied for failure to submit the return in an electronic format or for careless or deliberate errors. With the move towards online filing we expect that HMRC will be looking more closely at the annual returns it receives to target employers for employment related securities and compliance reviews. It is, therefore, essential that the returns are completed correctly and submitted on time to avoid closer scrutiny from HMRC.”