Getting ready for 2015/16 Employment-Related Securities (ERS) Filing

Mon 08 Feb 2016

After the major changes that were introduced for the 2014/15 tax year, employee share plans and the employer compliance process continue to be in a transition phase for 2015/16. The changes introduced from April 2014 in relation to share plan registration and annual returns filing led to a number of ‘teething problems’ which remain a concern for 2015/16.

Despite HMRC stating that the return templates for 2015/16 would be published in January 2016, these are not yet available (as of 5 February 2016). It is our understanding however that there will not be any significant changes made from last year.

Due to the problems which arose last year, including authorisation codes going astray in the post and a complete outage of the HMRC online system for several weeks, it is imperative that preparation begins as soon as possible, especially in relation to new share plan arrangements (introduced in 2015/16) which would not have been registered by 6 July 2015.

Recap on new online reporting changes introduced for 2014/15

From April 2014, all share plans (UK tax-advantaged and UK non tax-advantaged, including overseas plans with UK participants) must be registered online with HMRC via a new ERS online service. This included both new and existing share plans, even if the plan had previously been approved by HMRC.

All share plans in existence prior to 6 April 2015 should therefore have been registered (and for SIP, CSOP an SAYE plans, also self-certified) by 6 July 2015. For 2015/16 reporting purposes it is not required to re-register those plans, however an annual 2015/16 compliance return needs to be filed. Any new arrangements established after 5 April 2015 must be registered by 6 July 2016 and a compliance return also filed by that date. If a plan has ceased then a closure event needs to be reported.

What needs to be registered?

In relation to any new share plan arrangements for 2015/16, UK tax legislation requires employers to:

1. Register the share plans online;
2. File annual returns online; and
3. Self-certify certain plans online.

This applies to the following share plans:

• Enterprise Management Incentive (EMI) plan
• Share Incentive Plan (SIP)
• Save As You Earn (SAYE)
• Company Share Option Plan (CSOP)
• And all other arrangements, previously reported on Form 42, including foreign plans

SIP, SAYE and CSOP have to be self-certified as meeting the requirements of the applicable tax legislation. EMI option grants also have to be notified online (this needs to take place within 92 days of grant).  Once a plan is registered, this triggers a unique reference number, which in turn is used to submit annual filings online. 

The filing deadline for new share plan arrangements (both UK tax-advantaged plans and non-tax-advantaged plans) is 6 July 2016.

What happens if you do not register your existing plan(s)?

If you do not register a new tax-advantaged CSOP, SIP or SAYE share plan before 6 July 2016, the plan may lose all tax advantages.  To the extent that such share plans in place prior to 6 April 2015 were not registered on a timely basis last year, tax advantages may already be lost. If this applies, please contact us and we can discuss your specific case. 

Neither you, nor an agent acting for you can file an ERS compliance return for a plan until the registration process has been completed.

How to register and self-certify using the ERS online service

To register your plans and arrangements, you need access to HMRC Online Services and PAYE for employers. This, on its own, can take 7-10 days to obtain login details as login details are returned by HMRC using the post. (This will take longer if HMRC are posting the information to an overseas address.)   Once you have access:

1. Login to HMRC Online Services;
2. Continue past the security message;
3. Click on ‘Services you can use’ in the left-hand menu;
4. Click on ‘PAYE for Employers’; and
5. At the bottom of the page on the right-hand side there is a section called ‘employment- related securities’. Click on ‘Register a scheme or arrangement’ and follow the on-screen instructions.

Action to consider prior to April 2016:

Frustratingly, it was the above very first step in the process which often caused problems last year. It is therefore very important that you check now that you can access the ERS online portal. Things to be aware of:

• Even though you are being asked to report online, much of the process is dependent upon authorisation codes sent by post. HMRC will send ERS information by post to the address shown in its records for the company for UK PAYE purposes. You should check now that the address records are up to date.
• You may have, from the outset, outsourced your payroll and therefore there is only a payroll agent PAYE access currently set up. You will need to contact HMRC to set up a separate employer PAYE access to enable you to report ERS matters.
• You may have a legacy employer PAYE login set up but perhaps have since outsourced payroll and no longer have a record of the previous log in access password. This is proving a particularly difficult situation to resolve with HMRC so if you think you might need to request a new login you should contact HMRC now as it is likely to take several weeks for you to gain access to the ERS portal.

Why is it advisable to register your new share plan(s) well before 6th July 2016?

Considering the many teething problems which arose last year in relation to registering plans, we recommend that registration is undertaken as soon as possible to allow some time for any issues which may arise. 

Despite lobbying efforts, HMRC have not yet made any movement towards the use of e-mail communication or online authorisation code confirmation. This had led to cases where registration and agent authorisation code letters have been sent to incorrect or unmonitored addresses leading to delays and duplicate requests for codes. 

ERS correspondence from HMRC is usually marked for the attention of the Company Secretary even where the company does not have such an officer and even where the Company Secretary is not the ERS reporting officer for the company. This all increases the risk that such post will not be directed appropriately within a large organisation.  

Penalties exist for late filing and incorrectly completed/formatted returns – these are automatically applied as follows: 

• 7 July 2016 – an immediate £100 penalty
• 3 months late – an additional £300 penalty
• 6 months late – an additional £300 penalty
• 9 months late – an additional £10 per day the return remains outstanding
• There is a penalty of up to £5,000 for a material inaccuracy in a return which is not immediately addressed

Where relevant, loss of beneficial tax treatment may also occur. HMRC has urged agents to advise their clients to register their share plans well before the deadline (6 July 2016) to avoid any difficulties on registration, and from experience, there have been, and still are, many.

If you wish Mazars to assist with your annual ERS return reporting for 2015/16 then we request that you have registered your plan(s) by 30 April 2016. Only the company can register the plan. An ERS agent cannot register a plan for you.

Please see below a flow chart of possible reportable events. If you have any doubts on whether there is a reportable event, please let us know so that we can advise you.

ERS Guidance FAQ

HMRC has released a series of Employment-Related Securities Bulletins which provide information and updates on developments relating to employment-related securities. In the 16^th bulletin released in May 2014, HMRC outlines a number of common questions (with accompanying solutions) regarding the ERS online service:

1. Can I use any PAYE reference number?
2. I have two or more non-tax-advantaged share plans do I have to register each separately?
3. How do I correct an error made in naming a scheme?

If you experience any glitches and/or problems when registering a share plan or submitting annual returns, then please refer to HMRC’s ERS FAQs contained in the link below:

https://online.hmrc.gov.uk/information/faqs/ers or call HMRC ERS enquiries on 03000 585 213 or for IT errors with the online system call 0300 200 3600.

How can we help you?

If you would like to appoint Mazars to act as your ERS agent please contact your usual Mazars relationship manager or one of our specialist share scheme experts:

Contact details:

Nationally:
Liz Hunter, Tax Director, Share Schemes and Employer Solutions
Tel: 020 7063 4489 or email Liz.Hunter@mazars.co.uk

London:
David Lavelle, Tax Manager, Scheme Schemes and Employer Solutions
Tel: 020 7063 4338 or email David.Lavelle@mazars.co.uk

Midlands:
Ritchie Tout, Tax Director, Share Schemes
Tel: 0121 232 9627 or email Ritchie.Tout@mazars.co.uk

South:
Hannah Gooding, Senior Manager
Tel: 0117 928 1748 or email Hannah.Gooding@mazars.co.uk

Please note that Mazars can only assist with the filing of returns and not with plan registration, and HMRC will not, unlike years prior to 2014/15, be sending out any reminders to companies.