2024/2025 Annual Returns Must Be Filed and EMI Option Grants Notified by July 6, 2025
Companies operating employee equity incentive arrangements in the UK, including companies incorporated or registered outside of the UK, are mandated to file an online annual return with HM Revenue & Customs (HMRC) no later than July 6, 2025. Failure to do so for required companies will lead to automatic penalties applying.
In addition, companies which granted enterprise management incentive (EMI) options to their UK employees with a date of grant between April 6, 2024, and April 5, 2025, and have not already notified HMRC of those grants have until July 6, 2025, to make the notifications. Failure to do so will mean the options are not qualifying EMI options and the EMI beneficial tax treatment will not apply.
Below are some frequently asked questions (FAQs):
EMI Notifications
What Needs to Be Notified to HMRC?
In order for an option to be treated as a qualifying EMI option and benefit from the tax advantaged treatment applying to such an option, its grant must be notified to HMRC no later than July 6 following the end of the tax year in which the option was granted. For EMI options granted between April 6, 2024, and April 5, 2025, the notifications must be made no later than July 6, 2025. This includes where a replacement EMI option has been granted during the same period for example, following a Delaware flip transaction. In order to preserve the EMI tax beneficial treatment from the date of grant of the original option, the grant of the replacement option must be notified to HMRC by July 6, 2025.
How Do I Make a Notification?
Before your company can notify HMRC of the grant of an EMI option, the plan under which the option was granted must be registered with HMRC under the ERS online service (part of the HMRC PAYE online services portal). For more information about registering a plan, see here.
If your plan is already registered, you should log in to the online system by entering your username and password previously provided to you and follow the instructions to complete the notifications. For more information about notifying the grant of an EMI option, see here.
It is important to keep a screenshot of the confirmation that the EMI notification has been made and the acknowledgement reference number provided.
What Happens If I Fail to Make a Notification?
If you fail to notify HMRC of any EMI grant by the deadline, it will not be a qualifying EMI option and will not benefit from the tax beneficial treatment applicable to EMI options.
Annual Returns
Who Needs to File a Return?
Companies need to make a return in respect of ALL the equity incentive or share plans that they operate in the UK and in which UK resident employees participate. This applies irrespective of the type of equity incentive offered, including whether the plan is an HMRC tax-advantaged plan such as EMI or CSOP or a nontax advantaged arrangement such as nonqualified option arrangements or the issue of growth shares. You should also make a return in respect of employees who, although not resident in the UK, have carried out their duties in the UK during the relevant period.
A return is required in respect of each plan or arrangement that is registered or, if not already registered, has been used to grant options to relevant UK employees or directors between April 6, 2024, and April 5, 2025, and companies must submit a return even if there has been no activity during the relevant period. It is therefore important to notify HMRC of the termination of a plan or arrangement if a company is no longer operating it in the UK.
No return is required in respect of awards granted to non-employees such as advisers or consultants.
How Do I File a Return?
Before your company makes an annual return, its share incentive arrangement or plan must be registered with HMRC under the ERS online service (part of the HMRC PAYE online services portal). If the company has previously granted EMI options and properly notified the grant of those options as required under the EMI rules, its EMI plan will already be registered. However, if your company does need to register its plan or arrangement, it should be done in advance of the deadline, as there can be a delay between registering and being able to complete an annual return in respect of the relevant plan or arrangement. For more information about registering a plan, see here.
Tax advantaged plans have specific returns while nontax advantaged arrangements, such as growth shares or nonqualified options, are included in the return called “Other Employment Related Securities.” Download and complete the relevant return template here.
What Needs to Be Reported?
Returns must include details of the following events that have occurred between April 6, 2024, and April 5, 2025:
- the grant of share options or the acquisition of shares (including growth shares) by employees or office holders;
- the exercise of options;
- the release, lapse, cancellation, or variation of an option;
- an option exchange or rollover of an EMI or CSOP option; and
- chargeable events in relation to shares held by employees or office holders.
Details of grants or awards made to non-employees such as contractors or other advisers do not need to be included.
If you have previously registered a plan but no reportable events have occurred between April 6, 2024, and April 5, 2025, you must still file a “nil return.” Failure to do so will result in penalties. If you no longer operate your plan in the UK and there are no outstanding awards under it, you should register the cessation of the plan to avoid having to continue making nil returns.
What Penalties Apply for Failure to Comply?
An initial penalty of £100 will be due if a return is late, even by one day. Penalties then increase the later the return remains outstanding. If a return remains outstanding more than nine months after the deadline, HMRC has the ability to retroactively apply an additional penalty of £10 for each day the return remains outstanding beyond this time. HMRC does not send reminders that your company’s annual return is due.
In addition, HMRC can impose a penalty of up to £5,000 for a material inaccuracy in a return that is careless or deliberate and that is not corrected “without delay.”
