Setting up and administering a CSOP

By Tolley in association with Ken Moody
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The following Employment Tax guidance note by Tolley in association with Ken Moody provides comprehensive and up to date tax information covering:

  • Setting up and administering a CSOP
  • Introduction
  • Registration and self-certification
  • Informal advance clearance
  • Annual returns and penalties
  • HMRC enquiries, etc
  • Share valuations

Introduction

Until 2014/15, a company share option plan (CSOP) was one of the three types of tax-advantaged share schemes that required HMRC approval (the others being SIPs and SAYE option schemes). From 2014/15 onwards, the requirement for HMRC approval is replaced with a system of online self-certification.

HMRC has provided a review document at ETASSUM47190 which is intended to enable those setting up a scheme to ensure that they do not forget to include any of the legislative requirements.

Once the scheme is in operation, an online end of year return  must be submitted each year showing information such as options granted and exercised, as well as those that have lapsed during the previous 12 months. See below for more on annual returns and the penalties for late filing.

Registration and self-certification

A qualifying CSOP scheme is referred to as a ‘Schedule 4 CSOP scheme’. For a CSOP scheme to qualify:

  • notice of the scheme must be given to HMRC (online) by the scheme organiser
  • that notice must contain or be accompanied by such information as HMRC may require
  • the notice must also contain a declaration that the requirements of the legislation are met in relation to the scheme
  • if the declaration is made after the first grant of options, the notice must include a declaration that the requirements were met in relation to those options and have been met at all times since the first grant of options

ITEPA 2003, Sch 4, para 28A(2)–(3)

The review document included in ETASSUM47190 includes a list of documents and other information which can be useful in determining whether or not the scheme meets the requirements of Schedule 4. You can see a copy of that

More on Company share option plans: