There are a few countries that require special annual reports for share plan transactions (in addition to regular annual payroll reports). Australia and the UK are among these countries and are both on a fiscal year that differs from the calendar year. The UK tax year ended on April 5 and the Australian tax year will end on June 30.
- The UK Annual Share Plan Return (formerly known as Form 35, for tax-qualified awards, and Form 42, for non tax-qualified awards) is due to Her Majesty’s Revenue & Customs (“HMRC”) by July 6.
- The Australian Employee Share Scheme (ESS) Return must be filed with the Australian Tax Office by August 14. In addition, companies are required to provide their Australian employees with ESS statements by July 14.
Both returns (and the Australian ESS statements) can take a while to prepare (especially if companies need to report transactions for mobile employees and/or awards that were adjusted in a corporate transaction) and will need to be submitted electronically.
Please see our client alerts for Australia and the UK for more information on how to prepare the returns and make the submission. We are aware that the HMRC website was affected by an outage during the month of May, so companies may have less time than normal to make the UK submission.
Our Sydney and London offices are available to assist with the preparation and submission of the returns.
I recently moderated a webinar during which my UK colleagues and representatives from Her Majesty’s Revenue and Customs (“HMRC”) explained the new share plan registration requirements in the UK. These requirements apply to any company offering a share plan (whether tax-qualified or not) to employees in the UK. The registration has to be completed by July 6, 2015, but for practical reasons, should be completed well in advance of this date.
During our webinar, the HMRC officers provided a step-by-step explanation of the registration process. You can find a copy of the webinar slides, a recording of the webinar, FAQs regarding the registration process and other helpful reference materials below.
With the materials provided, we hope you will be able to complete the registration without further assistance but please don’t hesitate to contact us if you have any questions.
As I work with companies expanding into the UK, one issue that comes up regularly is whether to transfer the employer social taxes due on equity income (known as employer National Insurance Contributions or NICs) to employees. Employer NICs are due on equity income if the taxable event occurs at a time when there is a market for the company’s shares (typically, when the shares are publicly traded). If due, employer NICs are payable at a rate of currently 13.8% and are uncapped (meaning they are due no matter how much income the employee realizes). This distinguishes the UK from many other countries (e.g., the US or Germany) where social taxes are also due but only up to a certain threshold (or income ceiling). Often the employee has already reached this threshold with her regular salary such that no social taxes are due on equity income.
Because employer NICs in the UK are uncapped, if a company makes significant equity grants to employees in the UK, the employer NICs liability can be crushing. But the UK again distinguishes itself from virtually all countries by allowing the employer to transfer the employer NICs due on income realized from most equity awards to the employee. Continue reading