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Business Tax  •  HMRC  •  Share Schemes

Deadline for returns for approved share schemes and employment related securities

By RJP LLP on 4 July 2016


The following deadlines are fast approaching:

  • Companies which have approved share option schemes in place must make annual returns to HMRC by 6 July; and.
  • Companies which have unapproved share option schemes in place, and companies in which shares have been transferred to an officer or employee must make annual returns to HMRC by 6 July.

Penalties apply if the deadline is missed so it is important to know whether your company needs to make a return, and if so, it will be necessary to take action quickly.


When is a return required for approved share option schemes?

If your company has an approved share option scheme, for example an employee management incentive (EMI), it is necessary to file an annual return on form 40. This is the case whether or not there have been any share options granted or exercised in the year.

So even if there were no reportable events for the 2015/16 tax year, it is still necessary to submit a ‘nil return’ to avoid automatically incurring a penalty.


When is a return required in other circumstances?

A return must be made on form 42 in the following circumstances:

  • Where shares or other securities are acquired by employees (this includes shares purchased at market value);
  • Where restrictions on employees’ shares are lifted or varied;
  • Where shares or securities are converted into another class or type of security;
  • Where an employee either disposes of shares or receives a benefit from holding shares which gives rise to income tax.

The obligations to file a return applies to options, shares and securities held by current and former employees and directors. In addition,


What are the penalties?

If the appropriate online form is not submitted by the 6th July 2016 deadline, companies may suffer a penalty of up to £700. If there are further delays HMRC can apply an additional daily penalty until the return is made. There is also a risk that non-compliance could threaten a share schemes’ tax-advantaged status.


How to file the appropriate return

The necessary form must be filed online, which means that the company must be registered for HMRC’s ERS Online Service. If the company is not already registered, this will take time, so urgent action is needed now.

If you need advice on completing returns, or want to discuss the benefits of offering a HMRC approved employee share scheme in your company, please contact Lesley Stalker by emailing

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