Keywords: annual reporting, employee share awards, LTIP, RSUs, stock options
Companies that make share-based awards (such as share or stock
options, LTIP awards or RSUs) to employees in the UK must file an
annual report with the UK tax authority, HM Revenue & Customs
(HMRC). The form of this report depends on whether the awards
attract advantageous tax treatment or not. For awards that do not
receive advantageous UK tax treatment, this report is made on Form
42, which, for 2013, can be found
here. The form needs to be completed and returned by 6 July
2013 in respect of all reportable events which occurred during the
year beginning on 6 April 2012 and ending on 5 April 2013.
Reportable events include the grant of awards, the delivery of
shares pursuant to awards, and the expiry or other lifting of
restrictions from awards of restricted stock.
The inclusion of claw-back provisions (under which shares
acquired, or the proceeds of their sale, may be forfeit in certain
circumstances) is becoming increasingly common in stock plans, and
this may effect the reporting requirements. Shares delivered which
are subject to claw-back are likely to be "restricted
securities". If they are, the acquisition of those shares will
need to be reported as such, and there will be a further reportable
event when claw-back ceases to apply. The reporting (and tax)
requirements are simpler if a restricted securities election under
s431 Income Tax (Earnings and Pensions) Act 2003 is made when the
shares are acquired. This election has the effect that the shares
are taxed based on their full value, disregarding the claw-back, at
the time of acquisition, with no further tax or reporting
obligations when claw-back ceases to apply.
For tax-advantaged arrangements (approved schemes and EMI
options), specific forms are required, which will generally be sent
to relevant companies by HMRC.
Originally published May 16, 2013
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