With effect from 6 April 2014, HMRC is moving the administration and reporting of employment related securities online. These changes will have various implications but the pressing issue for most practitioners will be the abolition of form EMI1.
From 6 April 2014, all options must be notified via HMRC’s PAYE Online service. The draft legislation states that these changes will only affect options granted on or after 6 April 2014. However, HMRC guidance suggests that options granted prior to this date, but not yet notified, will also be affected. We are therefore seeking further clarification from HMRC.
From further information recently released by HMRC, our conclusion is that these changes will create considerably more administration than the pre-existing arrangements.
In brief, the proposals are as follows:
- the employer must register the EMI scheme via PAYE Online – where the employer is not already registered for PAYE Online, this will need to be arranged, preferably in advance of scheme implementation; and
- once the scheme has been registered by the employer, the individual options must be notified also via PAYE Online – this action can be performed by the employer or an authorised agent with access to PAYE Online.
The need to put the required registrations and authorisations in place will considerably increase the time and administrative effort needed to notify new options. In addition, agents will not be permitted to register the scheme, creating an effective two stage registration process for all new schemes.
Please note that the employee will still be required to sign a written declaration regarding the working time requirement. It remains to be seen whether HMRC will produce a standard template for this purpose. Again, we are seeking clarification from HMRC.
Other changes affecting share schemes
- HMRC will no longer be pre-approving SIPs, SAYE schemes and CSOPs effective from 6 April 2014 – these schemes will now be self-certified by the employer company at the end of the tax year in order to preserve tax advantages.
- All existing schemes, approved and unapproved, must be registered with HMRC by 6 July 2015 to avoid losing their tax advantaged status.
- All annual returns (e.g. form 42 and form EMI40) will need to be filed online effective for the tax year 2014/15 onwards – 2013/14 will be the final year which may be filed on paper.
- Registration and online filing brings with it the prospect of automatic penalties for non-compliance – if this is the case, it represents a significant change in HMRC’s formerly relaxed attitude to these returns.
If you would like to know more about these changes, please speak to Nicola Hewitt or David Charlton
