Employment Related Securities

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Online Filing Requirement for employment related securities

Companies frequently offer rights to acquire shares or other securities to their key employees and officers . This comes with new reporting obligations, new dates and new requirements with HMRC.

First, any employee share scheme must be registered online ahead of the filing deadline to ensure that the filing can actually be done – this affects the annual return and specific reporting on employee share transaction during the year.

The key deadline for filing with HMRC is no later than 6th July in the year following any such transactions.

As always, there are penalties if you fail to meet these obligations.  Failure to file the required returns by the deadline of 6th July will attract automatic late filing penalties of £700 and a further penalty of £10 per day if the returns are in excess of 9 months late.

Definition of “Employment Related Securities “

It is important to understand the definition of an employment related security and the nature of transactions that fall within the scope of legislation relevant to employment related securities.

An employment-related security includes shares, debt or other investment instruments, share options where the right or opportunity to acquire the securities interest or option is made available by reason of their employment.

Share Scheme Registration

The registration of the share scheme may be done via the online PAYE service.

The company is obliged to register the scheme . It cannot appoint a third party to register the scheme on its behalf.

Annual reporting

The online return replaces the traditional hard copy “Form 42”. The detail required includes a requirement to report the true market value of the shares acquired and details of share valuations.

 

The detailed registration and reporting requirements may appear complex and confusing but we can offer guidance on and assistance with the online registration of an employee share scheme. We can also submit the annual share scheme returns on your behalf in accordance with legislation and filing deadlines and advise on the management of potential tax charges where appropriate.

Summer Budget 2015

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Chancellor George Osborne announced a number of significant changes which will become effective in April 2016 and will affect businesses and individuals.
You have a window of opportunity now in the month of March to take action and mitigate the future impact of theses changes.

Dividend Tax

With effect from 5th April 2016 :
• the first £5,000 of dividend income will be tax free
• the dividend tax credit of 10% will be abolished
• dividend income will be taxed at the variable rates which reflect the individuals income tax band , Basic rate – 7.5% , higher rate – 32.5% , additional rate 38.1%
The example set out below demonstrates the financial impact of the change to dividend tax based on a net dividend income of £75,000. This example assumes that the tax payer has other income which utilises their personal allowance. 

Dividend income – £75,000
Tax payable –
a) 2015 / 2016 – £11,578
b) 2016/2017 – £16,000
A higher income tax payer with £75,000 of dividend income will pay increased income tax of £4,422 in 2017 compared to 2016.

Tip:
Consider the tax benefit of maximising dividends, where possible, prior to 5th April 2016. You should take care to consider the impact on your total taxable income prior to decision making.

Furnished Properties Rental

The 10% wear and tear allowance will be abolished with effect from 6th April 2016 and replaced by an allowable deduction for actual expenditure on furniture and accessories.

Tip:
If you are planning to replace furniture and/or accessories before 6th April 2016 consider delaying the purchase until post 6th April . You will utilise 100% of the wear and tear allowance in 2015/2016 and also benefit from the allowable deduction of actual furnishing expenditure in 2017.

Mortgage Interest Relief

Individual landlords will no longer be able to deduct all of their mortgage and other finance costs from their property income to arrive at their property profits. With effect from 6th April 2016 the relief currently available at marginal higher rates will be restricted to relief at the basic rate (20% ).
The change will be phased in over four years 2017 to 2021.

2017/2018 – 75% of cost allowable at highest marginal rates
2018/2019 – 50% of cost allowable at highest marginal rates
2019/2020 – 25% of cost allowable at highest marginal rates