This is a freeview 'At a glance' guide to penalties for Employment-Related Securities and share scheme returns.

What are the penalties for late and inaccurate schare scheme returns? When do they apply?

Subscribers see Shares, securities and options: tax compliance

Penalties for late filing and inaccurate annual share scheme returns

  • Returns must be filed online by 6 July following the end of the tax year.
  • A late filing penalty applies for returns outstanding from 6 July 2016 onwards.
  • HMRC operated a light touch approach to 2014-15 returns.
  • A penalty applies if the return contains inaccurate information.

If a responsible person, normally the employer, but also including the person from whom securities or options were acquired, in relation to a reportable shares or securities event, fails to make a share scheme return, they are liable to penalties under section s421JC ITEPA 2003 as follows:

Lateness

Penalty

Miss annual filing deadline

£100

3 months late

£300

6 months late

£300

9 months late

£10 per day

 

Share schemes: penalty if information not given correctly (s421JD)

(a) If a person fails to file the annual return online, or

(b) an annual share scheme return contains a material inaccuracy that is:

  • careless or deliberate, or
  • not corrected after the person becomes aware that it contains a material inaccuracy.

The person in question is liable for a penalty not exceeding £5,000 of an amount decided by HMRC.

Sections 100 to 103 of TMA 1970 do not apply to a penalty under section 421JC or 421JD.

Reportable events

Events which are required to be reported on the annual share scheme return include:

  • the acquisition or event treated as an acquisition of securities.
  • an interest in securities or a securities option pursuant to a right or opportunity available by reason of the employment of the person acquiring the securities, interest, option or right.

An annual share scheme return is required for tax years from 2014-15 onwards in relation to persons whose reportable event periods begin before 6 April 2014 (as well as those whose reportable event periods begin on or after that date).

Assessment
HMRC must assess:

  • a penalty for late filing penalty or for a failure to file online within 12 months of the filing deadline
  • a penalty in respect of a material inaccuracy no later than 12 months after HMRC becomes aware of the inaccuracy and 6 years after the date on which the person becomes liable for the penalty.

Appeal

A person may appeal against being charged a penalty as well as the amount of penalty payable under section 421JC or s421JD within 30 days. The tribunal may affirm the penalty or the amount of the penalty decided, or substitute another amount for that amount.

If schemes have been opened in error the only way to close it is to enter a 'final event' date, this should be the first day of the tax year in which it was opened.

Nil returns must still be submitted if the scheme is open but you think that further shares may be issued in the future. 

Penalties may be appealed in writing to:

Employment Related Securities 
Room G46 
100 Parliament Street 
London 
SW1A 2BQ 

or by email: This email address is being protected from spambots. You need JavaScript enabled to view it..

See How to appeal a tax penalty.

Small print

Finance Act 2014 introduced the requirement for the completion of an Annual Return in order to report taxable events in connection with employment-related securities.

Although HMRC previously required companies to report details of the issue of employment-related securities and options on forms such as form 42 and form EMI these was never previously described as annual returns.

Part 7 ITEPA 2003 was amended by introducing new sections 421JA to 421JC ITEPA 2003.

Useful guides on this topic 

Employment-Related Securities and share schemes
What are the tax consequences when a company gives shares to an employee or director? What are employment-related securities? What is best: shares or share options? How do you set up a share scheme?

Shares, securities & options: Tax compliance
What are the filing requirements for share-based remuneration? What needs reporting? When does it need reporting?  What penalties are there for late filing?

 


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