HMRC gets tough on businesses ‘failing to file’ new employer share scheme

January 8th, 2016

HMRC has introduced tough new penalties for employers running employee share schemes that fail to file accurate or on-time returns for the UK tax year 2014/2015. Penalties include levies of up to £5,000.

Head of Tax at Briars Group, said: “UK employers have always been required to make a return to HMRC of all shares or options either granted or awarded to their employees as part of their compensation package. This obligation is in respect of such ‘reportable’ events. Up until recently HMRC has taken a relatively relaxed approach to the pursuit of submission of these annual returns. That is about to change.”

Any award of shares or options made to employees is a ‘reportable’ event for UK tax purposes and must be reported to HMRC annually, irrespective of whether there is any immediate UK PAYE/NIC liability arising from the award. It also makes no difference whether the shares/options are awarded under a previously HMRC “approved” tax advantaged scheme or not.

The new online filing requirement has been introduced for the UK tax years 2014/15 onwards with tough new penalties for failure to provide this information. In summary:

  • Employers must now make an annual online return of such “reportable” events by the 6 July following the tax year in which the award of shares or options occurred;
  • Returns for the 2014/15 tax year submitted after the 6 July deadline will be subject to an initial automatic penalty of £100 for late submission;
  • In cases of continued non submission an additional penalty of £300 will be levied where the return is three months late and a further £300 where the failure continues after six months;
  • A further penalty is chargeable of £10 per day if the failure continues after 6 months; and
  • HMRC may also levy a penalty of up to £5,000 where the returns are incorrect.

If you are a Briars client, it is vital that you contact us as soon as awards of shares or grants of options are made to employees to avoid potential fines and to ascertain whether there are any immediate PAYE/NIC implications.

If you currently award your employees shares or are thinking of doing so, remember to take into consideration the reporting of such benefits; here at Briars we are able to support you.

Kate Jolly

Kate co-founded Briars in 1991 with Andrew Brierley. She specialised in tax law and today continues to advise clients on international operations, particularly land, expand and exit! In her spare time Kate is a Past Master of the City of London Guild of Entrepreneurs and a Director of CCARHT (Cambridge Centre for Applied Research into Human Trafficking).