My company is going to be late filing its annual share schemes return to HMRC this year, due to the COVID-19 pandemic. Will it still be subject to penalties?

The position on this will depend upon whether HMRC considers that the particular reasons for the late filing will amount to a ‘reasonable excuse’.

Companies operating employee share incentive arrangements are required to register those arrangements and then file an annual online return to HMRC in relation to them for each tax year. The deadline for filing the annual return is the 6th July following the end of the tax year which is being reported on.

Penalties can apply if the relevant 6 July deadline is missed. However, these penalties will not apply if HMRC is satisfied that there is a reasonable excuse for this failure.

HMRC has recognised that some employers and agents may be struggling to meet their annual returns obligations due to coronavirus, and has specifically referred to this in their Employment Related Securities Bulletin 35 (June 2020). In this, HMRC emphasises that employers should still try to meet their obligations as soon as they can, but that if employers cannot do so and this is due to coronavirus, HMRC will consider coronavirus as a reasonable excuse for missing some tax obligations. Where a company is in this position it will need to explain to HMRC how it has been affected by coronavirus when making its appeal against a penalty. HMRC also directs employers to its guidance about disagreeing with an HMRC tax decision.

It is worth noting that, even if a reasonable excuse for late filing exists, the employer should nevertheless complete the return as soon as possible if penalties are to be avoided. As well as referring to some circumstances which will not constitute a reasonable excuse, the Income Tax (Earnings and Pensions) Act 2003 states that where there was a reasonable excuse which has since ceased, the responsible person will be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased. For further details, see Practice Note: Penalties for failure to comply with reporting obligations.

For more details on the reporting obligations in relation to employment related securities generally, see Practice Note: Employment-related securities—reporting obligations. For details of the reporting obligations specifically in relation to statutory tax advantaged share schemes, see Practice Notes: EMI—HMRC annual return, SAYE—self-certification, registration and filing requirements, CSOP—self certification, registration and filing requirements and SIPs—self-certification, registration and filing requirements.

For details of the impact of the COVID-19 pandemic on share schemes more generally, see Practice Note: Coronavirus (COVID-19) impact on share schemes.