UK employee share plans: the online annual filing regime

The deadline for the online submission of year-end returns for any employee share plans and arrangements in respect of the 2021-23 tax year is 6 July 2023.

In order to use the service, companies must ensure that all their employee share plans and arrangements are first registered with HMRC via the 'Employment Related Securities' section of the Pay as You Earn (PAYE) online services portal. Following registration, companies must file their share plans annual returns online, also via the PAYE online services portal.

Online registration 

Annual returns cannot be filed in relation to an employee share plan or arrangement unless that plan or arrangement has first been registered via the PAYE online services portal. As part of that online registration process, plans that benefit from tax-advantaged treatment in the UK also need to be formally 'self-certified' with HMRC.

If a new tax-advantaged plan was introduced and awards were granted under that plan in the 2021-22 tax year, the plan must be self-certified on or before 6 July 2022 in order for the 2021-22 awards to benefit from the tax-advantaged treatment. This will apply to Company Share Option Plans (CSOP), Sharesave/Save As You Earn (SAYE) plans and Share Incentive Plans (SIP), but not to Enterprise Management Incentive Plans (EMI), for which self-certification is not required (although there is a separate online notification required for each EMI option grant).

Registration must be done by the company itself, and cannot be done by a tax agent for the company. Similarly, the termination of a plan can only be registered by the company.

Online annual filing

Once a new employee share plan or arrangement is registered with HMRC, an annual return must be filed online via the PAYE online services portal. One return is required for each plan or arrangement which has been registered, and it must be filed on an annual basis. Even if no activity has occurred under a plan in the relevant year, HMRC will still require a 'nil return' to be filed for that plan, unless the plan is notified to HMRC (via the PAYE online services portal) as having been terminated.

There are specific returns for UK tax-advantaged plans. There is also a return called 'Other Employment Related Securities (ERS)' return, to cover all other share plans and arrangements which are not tax-advantaged. Only one registration is required to cover all non-tax-advantaged arrangements, although companies can choose to have one registration per plan, if preferred.

HMRC's guidance on what should be included in an 'Other' non-tax advantaged return is very broad and includes some items that companies may not consider to be share plans, including some acquisitions of shares at market value by employees and directors.

What is the deadline for online annual filing?

Annual returns for the 2021-23 tax year must be submitted to HMRC via the PAYE online services portal by 6 July 2023.

Companies would be well advised to register, and to self-certify where relevant, their plans and arrangements well in advance of this deadline to ensure that there is sufficient time to complete both the registration and the annual filing.

The ERS online service only accepts submissions for up to six prior tax years. This means that it is no longer possible to use the PAYE online services portal to register an employee share plan or arrangement, or to file or amend an annual return, for the 2016-17 tax year (or earlier years). Any companies needing to register plans established in 2016-17 or prior tax years, or to amend or file annual returns for those tax years, must make a specific application to HMRC.

What are the penalties for failure to file an annual return?

Penalties can be incurred for late filing of annual returns. A £100 penalty is automatically issued if the annual return is filed late, even if only by one day. The penalty then increases incrementally, depending on how late the annual return is filed. HMRC will sometimes agree to waive the penalty, depending on the specific circumstances. However this cannot be guaranteed, and HMRC routinely imposes automatic penalties for late filing.

In addition, it has been widely reported that the volume of HMRC enquiries into share plans year-end reporting has increased significantly over recent years, with the returns being used in some cases by HMRC as an indication of whether the company is correctly calculating its associated UK corporation tax deductions.

Who should make the online annual filing?

The online filing can be completed by someone in the company, or by an agent authorised by the company and registered with HMRC to act on behalf of the company for these purposes.

The company secretary is required to make certain declarations within the annual return, although in practice these can be given by someone acting on the company secretary's behalf. An agent, or the employee within the company completing the annual return, will want to make sure that they are comfortable that they have sufficient authorisations from the relevant company secretary in order to complete the filing and make the declaration(s) on the company secretary's behalf.

How do I provide the information for the online annual return?

The online returns are primarily made up of information provided in spreadsheets, with a different spreadsheet for each return; although certain further information is also required at the time of submitting the filing online. Template spreadsheets are available on HMRC's website.

The spreadsheets must conform exactly to HMRC's requirements including formatting. Companies should use the template spreadsheets available on HMRC's website where possible, or build their own spreadsheets based on HMRC's compatibility data. HMRC has issued a 'technical note' to assist companies who wish to build their own systems.

Some companies may have their share plans administered by professional third parties, which may be able to provide the information required in a compatible format. Companies should liaise with their administrators in relation to this, and should start this process well in advance of the 6 July deadline.

HMRC has released a 'checking service' for companies, allowing them to test whether their spreadsheets will be compatible when uploaded to HMRC's online portal without actually sending any of the data to HMRC. If there are any compatibility issues, an error report will be generated giving details of the fault and where it is located within the spreadsheet. The checking service is available via the plan registration pages within the PAYE online services portal. It may be helpful to use this service to correct any errors before attempting actual submission.

How do I file the annual return?

In order to file the annual return online, the company (or its agent) must access the PAYE online services portal and select the registered plan/arrangement in relation to which it wants to file the return. Once selected, you will see a 'start' page, which lists the information that you will need in order to file the return.

After this, you will be taken through various screens which will allow you to make a nil-return or upload the spreadsheets containing the reportable information. You will also be required to give details about the company filing the return and any other group companies covered by it.

For tax-advantaged plans other than EMI, you will also have the opportunity to declare if there has been an alteration/variation that needs to be notified to HMRC and to confirm whether the requirements of the relevant legislation governing the plan continue to be met.

For EMI options granted on or after 6 April 2023, employer companies are no longer required to set out details of any restrictions on the shares that can be acquired within the option agreement. This change also applies to EMI options granted before 6 April 2023 which have not yet been exercised. For options granted on or after that date, employer companies no longer need to declare that an employee has signed a working time declaration when they are issued an EMI option.

At the end of the online process, you will be shown a summary page with the information provided in the return although not the information in the spreadsheets themselves. Once you have completed the filing by confirming that the information in the return is correct and complete, you will see a confirmation page with an individual submission reference. This can be downloaded as a PDF and saved onto your system. Once you get to this point, as long as the return has been filed within the deadline, there will be no penalties for late submission.

You will need to complete this process for each return required in relation to each plan or arrangement.

After approximately 48 hours, the plan registration pages within the PAYE online portal should be updated to show the return as having been successfully submitted.

If you realise that you need to make changes to any of the information you have uploaded as you go along, you should use the 'edit' function from the summary page near the end of the return rather than trying to use the backspace.

Once you have submitted the return, you will not generally be able to see the information that you have included within the filing. You should therefore keep careful records, including screenshots, of the final information submitted.

Companies must file nil returns for all inactive plans until the year after the tax year in which the termination of the plan is registered. Where you have a historical plan which is now inactive, you should take the necessary steps to register it as having been terminated to avoid having to complete nil returns for future years.