Annual returns

As part of its monitoring process, HMRC requires employers that operate share schemes to make returns on an annual basis.

For reports relating to tax years 2013/14 and earlier, there were five different forms that might have been needed to be completed, a separate one for each of the HMRC-approved schemes, plus form 42  which covered all unapproved arrangements. For tax years 2014/15 onwards, those paper forms have been replaced with a system of online reporting (see below).

Historically, HMRC did not seem to take a particularly aggressive attitude towards those that failed to comply with their filing obligations. While there are penalties to be paid by anyone that fails to submit the required annual return form by deadline for filing (see below), it was almost unprecedented for these to be charged, although this has changed with the advent of online reporting. FA 2014, Sch 8 was inserted into ITEPA 2003 provisions for automatic penalties in relation to late filing in respect of all annual returns required in respect of employment-related securities (whether under a tax-advantaged scheme or not). The first annual returns that could fall foul of these new penalties were those covering events taking place during the tax year 2014/15, however initially, HMRC operated a ‘lig