UK Employee share plans – reporting deadline looms - Bird & Bird - June 2012

Employee share plans – reporting deadline looms

Companies operating
employee share plans in the UK need to report for 2011/12 before 7 July
2012, we look at what you need to do.

EMI and Approved Plans

The
special annual reporting forms for EMI and CSOP are relatively
straight-forward to complete. EMI option grants do not need to be
reported on the annual form (they are, however, required to be reported
on Form EMI 1 within 92 days of grant in order for the EMI options to
qualify for tax relief).

All option exercises need to be
reported even if no tax is payable. The forms also require other
non-taxable events to be reported such as option lapses, surrenders and
adjustments to reflect changes in share capital.

The special
forms for SAYE and SIPs are more complicated to complete but we assume
that will be dealt with by your SAYE / SIP administrator.

Sharesave: www.hmrc.gov.uk/shareschemes/form34-2012.pdf

CSOP: www.hmrc.gov.uk/shareschemes/csop-form35-2012.pdf

SIP: www.hmrc.gov.uk/shareschemes/sip-form39-2012.pdf

EMI: www.hmrc.gov.uk/shareschemes/emi40-2012.pdf

Unapproved Arrangements and Form 42

All other "reportable events" need to be reported on Form 42 (which makes the form rather complex).

The scope of
"reportable events" is very wide and broadly includes any event
involving shares, interests in shares or rights to acquire shares which
might give rise to an income tax charge in the hands of employees. For
these purposes "employees" include associates, prospective employees,
former employees (in the previous 7 years) and office-holders (such as
directors and NEDs).

In particular reportable events include:

• 
  
  Acquisitions of shares and interests in shares
  
  


• 
  
  Lifting or variation of restrictions affecting shares or interests in shares
  
  


• 
  
  Conversion of share rights
  
  


• 
  
  Discharge of notional loans
  
  


• 
  
  Sale of shares at an overvalue
  
  


• 
  
  Manipulation of share values
  
  


• 
  
  Receipt of special benefits in connection with shares
  
  


• 
  
  Grant, exercise,
  assignment or release of unapproved options or the receipt of benefits
  in connection with options (such as payment for agreeing not to exercise
  an option)
  
  

Events are reportable
where securities (or interests in securities) are made available by
reason of employment or where they are deemed to be made available by
reason of employment (with limited exceptions for personal, family or
domestic arrangements).

Many events are therefore reportable
even where no tax is payable. There is, however, no requirement to
report relevant steps which arise under the "disguised remuneration"
rules (but charges arising under that regime are subject to PAYE and
NIC).

HMRC provides guidance on completing Form 42 which covers the main areas of difficulty.

The key points are:

• 
  
  incorporations of new
  companies are not reportable if these are straight-forward (i.e. the
  director subscribes for shares at par and there are no other securities
  issued) nor are further allotments of shares to the initial subscribers
  at nominal value (unless in connection with another employment);
  
  


• 
  
  share for share exchanges and issues are
  
  

READ THE REST