ERS – Form 42 – Make sure you share by 6 July!
The 2023-24 UK tax year has just ended and attention turns to preparing and filing Employment Related Securities Return (we are going to call it Form 42).
Do I need to file the Form 42?
You may think the filing requirement is in the name, ‘Employment Related Securities’ but is unfortunately a misnomer – it does not just apply to scenarios involving shares being awarded to employees and officers. There are numerous scenarios where Form 42 is required which include the following common examples:
• Various reconstructions including share for share exchanges.
• Share buyback (in certain circumstances).
• Bonus issue of shares and rights issue.
• The award of shares to employees/officers that are not family members by either new subscription of shares or transfer of existing shares.
• Restriction on shares being lifted.
The following share transactions are not generally reportable which means most share transactions in owner-managed companies we come across are not reportable events:
• Transfers (not subscriptions) of shares in the normal course of domestic, family or personal relationships.
• Where a limited company is incorporated in the UK and initial subscriber shares (also called founder shares) are acquired.
• Where a limited company has been incorporated in the UK and further shares are allotted before the commencement of trading or transfer of assets to the company.
• Where employees are not UK resident and do not have any UK duties in the year of the award, and are not likely to become UK resident or work in the UK during the vesting period of the award.
Form 42 – The compliance
The filing date of the 2023-24 Form 42 is 6 July 2024 and missing the deadline means HMRC will issue late filing penalties even if no tax is payable.
Missing the filing deadline can be expensive. HMRC will apply an initial £100 penalty automatically. After 3 months the penalty will be £300 which increases by another £300 if the return is 6 months late. HMRC may apply further penalties of £10 a day if it is 9 months late.
Form 42 – Summary
If you are not sure if the transaction is reportable on Form 42, please ask your RPGCC contact.
If you would like to speak to a member of our Corporate Tax team regarding ERS (Employment Related Securities) and reporting using Form 42, contact us on 020 7870 9050 or email us at hello@rpgcc.co.uk.
