Don't neglect your share scheme annual reporting duties. All companies operating an employee share scheme or arrangement must comply with their obligation to file an annual return for the 2020/2021 tax year on or before the deadline of 6 July 2021. You will not receive any filing reminders directly from HMRC and automatic financial penalties will be issued for each late filing.

We recommend filing your annual returns online via HMRC's Employment Related Securities (ERS) Service as soon as possible to avoid any penalties being incurred.

All companies who have registered an employee share scheme with HMRC have an ongoing legal obligation to file an annual return against the scheme following the close of each tax year in which it remains active. This includes both HMRC tax-advantaged share schemes such as EMI, CSOP, SIP and SAYE and any non tax-advantaged or 'unapproved' schemes or arrangements. Each registered share scheme requires a separate annual return.

All 'reportable events' that have taken place during the last tax year must be notified to HMRC on the annual return. This includes (but is not limited to) the grant of new options; any adjustments made to existing option terms; the release, lapse or cancellation of options i.e. in the event an employee has ceased employment with the company or other disqualifying events; and the taxable or non-taxable exercise of options during the previous tax year.

The matters to be reported will differ depending on the type of scheme or arrangement you currently operate and if you have any questions in relation to 'reportable events' we can help.

If there has been no activity in the previous tax year or there are no outstanding options under a registered scheme, you will be required to file a 'nil return'. 

You should consider taking steps to close any registered scheme if there are no existing options in issue and no further options are likely to be granted under the scheme in the future. This would avoid the administrative burden of filing an annual return for each year the scheme remains inactive or incurring any financial penalty for non-compliance if the obligation to file a return is not complied with.

The submission of annual returns can either be carried out by the company directly or by an agent appointed by the company to act on its behalf. The Birketts Employee Incentives team can file ERS annual returns for you so please do be in touch if this would be of interest to you.

Does your current share scheme remain 'fit for purpose' in a post-COVID world?

As lockdown restrictions begin to ease and companies start to make plans for the future of their business in a post-COVID world, it may also be a good time to reflect on your current share scheme to assess whether it remains fit for purpose in the wake of the pandemic.

  • Do performance-related targets set prior to the pandemic remain achievable in order to properly incentivise your key employees?
  • If the exercise of share options was contingent upon a sale of the business in the short to medium term, does this remain a realistic prospect?   
  • Do the terms of the scheme need to be re-aligned to fit new business objectives?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.