EU State aid approval | HMRC confirms continuation of EMI – and a reminder about annual returns

Our recent Insight covered the European Commission's announcement on 15 May 2018 that that it had approved the renewal of EU State aid for the enterprise management incentive (EMI) regime.

In response to the European Commission's decision, HMRC published Employment Related Securities Bulletin 28 on 31 May 2018.  HMRC confirms that the decision means that the tax-advantaged EMI scheme continues to operate in the same way as described in HMRC’s current guidance and practice for qualifying EMI options, and that no changes have been made to the scheme.

The formal decision was published on the European Commission’s competition website on 7 June 2018 (under reference SA.47789).

EMI options therefore continue to be available as a valuable incentive which qualifying companies can offer to recruit and retain their qualifying employees.

In relation to any purported grants of EMI options made during the period following the expiry of the previous EU State aid approval on 6 April 2018 and the date of the European Commission's decision (15 May 2018), the fact that it is a prolongation decision together with the way in which it is drafted suggests that such grants are likely to qualify for EMI (provided the normal qualifying conditions are met and the grant of the options was notified to HMRC within 92 days of grant).  We would hope that HMRC will publish a further update confirming that this is the position in the coming weeks.

Annual returns for employment-related securities | deadline 6 July 2018

The deadline for submitting annual returns in respect of employment-related security arrangements for the tax year ending 5 April 2018 is 6 July 2018.

Annual returns containing details of reportable events during the tax year must be submitted for all tax-advantaged plans (including EMI) and non-tax advantaged employment-related securities arrangements. The definition of what constitutes "employment-related securities" is wide and will broadly capture any shares if the right or opportunity under which they were acquired was available because of an employment.

Companies that have adopted new plans and arrangements during the tax year ending 5 April 2018 are reminded that, in order to submit an annual return, it is necessary for the company to first register the “scheme” with HMRC’s online Employment Related Securities service.   The registration process takes up to 10 days, so it is important to allow time for registration to enable companies to meet the 6 July deadline for filing annual returns.  Late filing will now trigger automatic penalties from HMRC.

Companies that operate tax-advantaged plans (the share incentive plan, company share option plan, and savings related share option or ‘SAYE’ plan) will also need to complete the important self-certification declaration as part of the annual returns process.  

HMRC included a reminder in Employment Related Securities Bulletin 28 that, after the 6 July 2018 deadline, companies will not be able to register or submit an annual return in respect of any new tax-advantaged CSOP, SIP or SAYE plans established during the tax year ending 5 April 2018.

Further information on the registration and annual returns process, together with the templates to be completed and submitted with the annual returns, is available on HMRC's Employment Related Securities service.  Note that there are separate templates to use for tax-advantaged plans, and the "Other" template should be used for arrangements which are not tax-advantaged.

If there has been no activity for a registered scheme in respect of the tax year then a nil-return should be filed.

It is important to take screenshots of the information uploaded to HMRC, for the company's records.

Please do get in touch if you have any queries or would like to discuss any of the issues covered in this Insight.