Employment related securities – what do employers need to report?
What are employment related securities?
In most circumstances, when employees and directors are given shares in their employing company or an associated one, HMRC deem this to be by virtue of their employment. The employer must therefore file an annual “employment related securities” return with HMRC. It may also give rise to income tax and National Insurance contribution liabilities.
Seek specific advice about these possible liabilities, preferably well in advance of the transaction, to make sure they are accounted for correctly (through PAYE or otherwise). Make any necessary elections by the 14-day deadline.
Events that need to be reported
Employers must report events regarding employment related securities or options to HMRC by 6 July following the end of the tax year in which they take place. These include:
- Acquisition of shares, or interests in shares, by an employee
- Grant of options to an employee
- Exercise of share options by an employee
- Receipt of a benefit in money or money’s worth in relation to an employee share option
- Assignment or release for consideration of an employee share option
- The falling away of restrictions attaching to shares held by an employee
- The disposal for consideration of restricted securities by an employee
- Other events which give rise to a tax charge in relation to employment related securities
The following events are also reportable but often overlooked:
- A share for share exchange where the exchange is into an existing company
- Any bonus issue of shares in a private company, which an employee/director participates in
- A management buy-out situation involving other than the initial subscriber shares
Are there any exemptions?
It’s not all bad news, an exemption is available where the right or opportunity is provided by an individual in the normal course of domestic, family or personal relationship, ie. shares in a family business are transferred to a family member. However, whether you can rely on that will depend on the specific circumstances.
If you think you have a reportable share transaction and wish to discuss this further, do please let us know.
Look out for my next blog, which will cover changes to termination payments and optional remuneration.
For more information on how we can help, please speak to your usual Larking Gowen contact.
Call 0330 024 0888 or email email@example.com.
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