Non-qualified stock options (NSOs) reporting deadline for your UK employees – 06 July 2024
Companies have less than five weeks to go until UK Non-qualified stock option (NSO) reporting deadline for UK employees. If your company has granted Non-qualified stock options (NSO) to UK employees, you will need to make the required regulatory filing by the 06 July 2024.
The regulatory filing, which is referenced as Employment Related Securities (ERS) annual returns, which covers NSOs and ISOs needs to be filed with the UK Tax Agency, HMRC.
These will be relevant to you if your company has UK employees and/or directors that have been granted shares or options. Many US companies grant US NSOs to their UK employees but fail to make the necessary statutory filing to the UK Tax Agency.
It is important to note that the UK Tax Agency does not send reminders to companies to file their share plan returns, so many US companies are unaware that they are not compliant.
If your company has UK employees or directors who have been issued shares or granted options and then action needs to be taken in respect of this upcoming HMRC filing deadline, 6th July 2024.
The majority of USA companies with UK employees will have issued either NSOs or ISOs in the USA parent company to the UK employees and these will be treated as Non-tax advantaged plans (also known as ‘unapproved’ or ‘other’ plans and previously all schemes which were filed on a Form 42) in the UK.
All employment related securities (ERS) annual returns for the 2023/24 tax year must be filed by 6 July 2024. The returns are filed via HMRC’s online service (via the PAYE for Employers – Employment Related Securities section).
A couple of points you should note in particular:
- It is a legal requirement for the company that grants UK employees employment related securities, such as share option to file the Employment Related Securities (ERS) annual return.
- Even if there have been no reportable events, a filing must still be made to HMRC (known as a ‘nil return’);
- one-off share acquisitions by employees or directors must still be reported as part of an “other” arrangement; the returns are not limited to formal ‘schemes’.
Penalties
If a return is filed after 6 July 2024, HMRC will issue a late filing penalty of £100 ($125) on 7 July 2024. Additional late filing penalties will be charged if the return remains outstanding as follows:
- three months after the filing deadline £300 ($375)
- six months after the filing deadline an additional £300 ($375)
- nine months after the filing deadline, further daily penalties of £10 may be charged until the return is filed
As well as the late filing penalties, HMRC may also issue a penalty not exceeding £5,000 ($6,250) if a return is found to contain a material inaccuracy that was careless or deliberate, or if the return is not corrected once the company becomes aware that the return is incorrect.
Please note the registering of any plan creates an annual filing obligation. If a plan is registered but no reporting events occur during the tax year, a nil return still must be filed. The obligation to file only ceases once the scheme has been closed down. Likewise, if a plan is incorrectly registered, a nil return is required to be filed after which the scheme should be closed down. Failure to do so may result in late filing penalties being issued.
Please get in touch if you need assistance or any further information.