Employment Related Securities and Form 42

HMRC requires UK businesses to make an annual notification where shares or securities have been acquired by employees including directors and salaried members. The annual deadline for making this filing is 6 July of each year, and applies for the previous tax year ending on 5 April.

You are required to file if:

  • HMRC have requested you to do so
  • A reportable event has occurred in the tax year ended 5 April regardless of whether there is a tax liability that has arisen

What is a reportable event?
Most commonly, a reportable event occurs when securities have been acquired by an employee (including directors and salaried members) by reason of their employment and includes the opportunity of investing in a fund, shares of the employer or carried interest arrangements. Other reportable events might also apply to you. 

The rules are far reaching and include past, present and prospective employment and immediate family members and other connected persons to such employees. If you are in doubt, please contact us and we can help you determine whether a filing is required.

When is a report not required?

  • A report may not be required if the shares were acquired independently by directors and employees, providing the following criteria is met.
  • Where directors and employees acquire shares in their employer and have purchased those shares on the open market, for example through an independent broker, then if:
  • The employer is a company or part of a group listed on a recognized stock exchange
  • The opportunity to acquire unrestricted shares/securities is made available to all shareholders, including employee shareholders
  • The unrestricted shares/securities are acquired independently of the company, for example through a broker at full market, a report of those shares acquired by directors and employees is not required
  • The majority of newly incorporated companies will not need to complete an ERS Return in respect of the initial subscriber (founder) shares, although there may be additional transactions which do need to be reported.

How do I file?
HMRC have an online filing system which requires log-on details to be obtained in advance and has historically experienced capacity issues, therefore confirming your position and filing early is recommended. If you require any assistance with this, please do not hesitate to contact our Regulatory Tax Advisory team.

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