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End of year reporting of employee benefits and security transactions

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End of year reporting of employee benefits and security transactions

Many employers choose to provide their employees with non-cash benefits in addition to their salary in order to attract the talent they need to grow their business.

In addition, sometimes directors and senior employees are awarded shares or options in order to retain and incentivise them to meet growth targets so that they share in the value achieved from an exit.

By providing benefits or awarding equity incentives, it creates reporting obligations to HM Revenue & Customs (“HMRC”). Common examples of reportable benefits include company cars and private medical insurance, but there are also less common benefits which may need to be considered.

Reporting obligations apply to shares or options issued during the past tax year or if you have a reportable share scheme already in place.

The deadline for submitting the forms for both benefits and equity incentives is 6 July 2020.

End-of-year expenses and benefits (forms P11D(b) and P11D)

At the end of each tax year, employers need to consider the completion and submission of forms reporting taxable benefits. These forms must be completed for all directors and employees who have been provided with taxable benefits during the 2019/20 tax year and submitted to HMRC. Common reportable benefits include company cars and private medical insurance, but it is also necessary to consider less common benefits such as loans and living accommodation. The conditions for tax-free benefits such as staff events and childcare support should be also be considered. Click to see a comprehensive list of benefits on the HMRC website.

Employment Related Securities (“ERS”) and Employment Management Incentive (“EMI”) End of Year Returns

If your employees were granted options over securities (such as shares), acquired securities, disposed of securities or had their rights to securities altered during the year ended 5 April 2020, you may need to disclose this to HMRC by way of an end of year return. Even if an employee or director has paid for the securities or options, the Company may still have reporting obligations.

In addition, if you disclosed transactions in prior years or have an open ERS or EMI scheme you will be required to file a nil return or notify HMRC of the cessation of the scheme if applicable.

The deadline for submitting these end of year returns is 6 July 2020.

Don’t delay! HMRC may issue penalties for failure to file. If you would like to know more about how we can assist with end of year reporting, please get in touch with the Creaseys Tax Team on 01892 546546.