The Employment-Related Shares & Securities Bulletin provides information and updates on developments relating to employment-related securities, including the tax-advantaged employee share schemes.

This bulletin contains articles on:

1. New telephone number
2. Scheme approvals – company resolutions
3. Scheme approvals – process
4. Share Incentive Plan – Notice to participants
5. Real Time Information and PAYE deadlines – expatriate workers and employees receiving employment-related securities

Enquiries about the content of this bulletin should be addressed to:

Hasmukh Dodia

Employee Shares & Securities Unit

HMRC

Room G53

100 Parliament Street

London

SW1A 2BQ

Email: Shareschemes@hmrc.gsi.gov.uk

The Bulletin will be published as and when sufficient articles or updates are available, or when HMRC has an item that it wishes to bring to your attention quickly. We welcome any suggestions for future articles although we cannot guarantee publication.

A reference to ITEPA is a reference to the Income Tax (Earnings & Pensions) Act 2003 as amended.

1. New Telephone Number

The telephone number for contacting our team in Nottingham has been changed from 0115 974 1250 to 0845 600 2622. The old number will not operate from 3 December 2012. The new telephone system will help us to provide a better enquiry service by directing the calls to the most appropriate person or team.

Our website has been updated in most places but there will be archived pages and forms which will still show the old telephone number.

2. Scheme Approvals – Company Resolutions

We continue to receive schemes submitted for approval without the appropriate evidence from the company that the scheme has been adopted in a form which HMRC has agreed is capable of approval. There have also been instances of resolutions which are:

• signed but not dated
• signed by an unidentified individual.

This leads to a delay in the approvals process until a certified copy of such a resolution or minutes is produced.

Before a CSOP, SAYE and SIP can be given formal approval we need to see evidence that the scheme has been established by the company. This would usually be done by a resolution, either passed by shareholders or at a Board meeting, establishing the scheme. Please see ESSUM11220. The resolution or extract from the company minutes needs to be certified as a true copy of the original by an officer (director/company secretary) of the company or an authorised practitioner.

If after the date of establishment there have been amendments made to the scheme to meet the approval requirements then importantly we also need to see evidence in similar format to that set out above that the amendments have been validly adopted.

The documents can be submitted to us electronically by email but you should be aware that information sent by email over the internet is not secure and it is at the risk of being intercepted and read by people other than those it was intended for. Any information you send to HMRC by email is at your own risk.

3. Scheme Approvals – Process

We are grateful to those who have followed our revised approvals process requirements brought in to improve customer service. Providing scheme rules with tracked changes against a similar scheme which HMRC has recently approved helps us to significantly improve our service.

Of course if you have not had a scheme approved by HMRC in the last two years, or there is no existing scheme of the same type for the same company, then please do not provide a comparison against a scheme that is waiting to be approved.

4. Share Incentive Plan – Notice to Participants

In a HMRC approved Share Incentive Plan companies can choose to offer partnership shares. These shares are bought by the participating employee by entering into a partnership share agreement (PSA) allowing deductions to be made from the employee's salary. Paragraph 48 of Schedule 2, ITEPA requires that a notice is given to the employee about the possible effect of deductions on benefit entitlement. The form of the notice is prescribed in regulations and included in our published model PSA.

We often receive enquiries about whether the wording of this notice in relation to the Department of Social Security could be changed to Department for Work and Pensions. We are happy to confirm that updating the name of this Department in the PSA notice is acceptable.

Our published PSA model will be updated as soon as a legislative opportunity is available to make this minor change.

5. Real Time Information (RTI) and PAYE Deadlines – Expatriate Workers and Employees Receiving Employment-Related Securities

When a payment is made to an employee, legislation sets out the time frame within which employers must operate PAYE and / or assess National Insurance Contributions (NICs) that are due. In addition, with the move to real time reporting of PAYE, employers and pension providers must report PAYE information in real time, usually ‘on or before’ payments are made to employees or pensioners. Further details, including on the exceptions to this requirement, can be found at http://www.hmrc.gov.uk/rti/employerfaqs.htm#14

Expatriate Workers

HMRC will apply a common sense approach to deciding whether we agree that employers of expatriates have a reasonable excuse for not telling us on time about any tax and NICs due on payments and notional payments made in-year to expatriates by third parties and overseas employers; or for not paying this tax and NICs by its due date. In assessing whether we agree that employers have a reasonable excuse, HMRC is not expecting employers to materially change the operation of their current UK or overseas payrolls for making payments to employees where these payroll practices are reasonable and widely accepted.

Expatriate employers for this purpose are:

• UK employers who are required to operate PAYE and NICs in relation to employees sent to the UK on assignment, where those employees remain employed by, and are fully or partially remunerated by, the overseas employer, including one which is a branch or parent of the UK Company.
• UK employers who are required to operate PAYE and NICs in relation to their employees sent overseas on assignment, where those employees remain employed by the UK employer, but are fully or partially remunerated by an overseas employer, including one which is a branch or parent of the UK Company.

All Employees Receiving Employment-Related Securities

This approach will also apply where employment income is paid to any employee in respect of employment-related securities (for example, on the exercise of share options). HMRC will therefore take a common sense approach to deciding whether we agree that employers have a reasonable excuse for not telling us on time about any tax and NICs due on employment-related securities, or for not paying this tax and NICs by its due date. In assessing whether we agree that employers have a reasonable excuse, HMRC is not expecting employers to depart from currently accepted practice in relation to arrangements sometimes referred to as ‘sell to cover’, ‘sell all’, ‘self fund’ or ‘hold all’.

For Both Expatriate Workers and Employees Receiving Employment-Related Securities

HMRC expect that the late reporting of expatriate and employment-related securities income would normally take place no later than the next regular monthly payroll date, and that the relevant payment would normally be made to HMRC within the normal PAYE deadlines for that month.

In addition, employment income must be subject to tax in accordance with the relevant legislation for the year of receipt or entitlement, and must be subject to NICs by reference to the correct pay period. Payments identified after 19th April following the end of the tax year in which they are made must be reported on an Earlier Year Update.

HMRC will query any arrangement where there is evidence of avoidance or manipulation.

The HMRC approach to ‘reasonable excuse’ described above will not affect the application of section 222 of the Income Tax (Earnings and Pensions) Act 2003 in cases where this provision applies. Further details can be found at http://www.hmrc.gov.uk/manuals/eimanual/eim11951.htm.

HMRC will continue to monitor the practical application of RTI reporting requirements and will consider further legislation if necessary.

Source: HMRC www.hmrc.gov.uk. Copyright Acknowledged.