Form 42 and Employment Related Securities
Form 42
Where shares are issued to employees by their employer the transaction must be notified to HM Revenue & Customs (“HMRC”) on a Form 42.
A Form 42 may therefore be required in the following circumstances:
- the incorporation of a business,
- the gift (or other acquisition) of shares to/by an employee,
- a new issue of shares or a share for share exchange.
Broadly the only exceptions are the transfer of initial subscriber shares when a new company is incorporated or if the transfer is in the course of a normal family or personal relationship. From 6 April 2014, Form 42’s must be submitted online.
Approved Share Schemes
From 6 April 2014, all pre-existing company share schemes are required to register online. Companies with HM Revenue & Customs (“HMRC”) approved share schemes such as EMI (Enterprise Management Incentives), CSOP (Company Share Option-Plans) or SIP (Share Incentive Plan) schemes must self-certify online that the scheme meets certain conditions.
If HMRC are not informed of the scheme through the online form by 6 July 2015 then any tax advantages may be lost permanently.
All EMI schemes set up after 5 April 2014 must register online with HMRC within 92 days of the date of the grant of shares.
Penalties
The deadline to submit all Employment Related Securities forms for the year to 5 April 2015 is 6 July 2015.
If the form is filed late then an automatic £100 penalty applies. If the form is filed incorrectly, HMRC can issue a penalty of up to £5,000. It is therefore important that the forms are completed correctly for each tax year.
Employer Registration
In order to be able to file the online form, the employer must register within the Employment Related Security section of its ‘PAYE for Employers account’ on HMRC’s website. Upon registration, a scheme reference number will be provided which will be needed to prepare and submit the online form.
Once registered, the employer will need to submit an electronic form each year regardless of whether or not there have been any reportable transactions. After registration, we can prepare the forms for your approval and submit them on your behalf.
The process of registering as an employer and then reporting the share transaction can take over three weeks, so for employers who have reportable transactions in the year, we recommend that this be completed as soon as possible and well in advance of the 6th July 2015 deadline.
If you would like more information or if you require our assistance completing any of the online forms please contact our Tax Director, Jenny Marks.
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