16 May 2013
Companies that make share-based awards (such as share or stock options, LTIP awards or RSUs) to employees in the UK must file an annual report with the UK tax authority, HM Revenue & Customs (HMRC). The form of this report depends on whether the awards attract advantageous tax treatment or not. For awards that do not receive advantageous UK tax treatment, this report is made on Form 42, which, for 2013, can be found here
. The form needs to be completed and returned by 6 July 2013 in respect of all reportable events which occurred during the year beginning on 6 April 2012 and ending on 5 April 2013.
Reportable events include the grant of awards, the delivery of shares pursuant to awards, and the expiry or other lifting of restrictions from awards of restricted stock.
The inclusion of claw-back provisions (under which shares acquired, or the proceeds of their sale, may be forfeit in certain circumstances) is becoming increasingly common in stock plans, and this may affect the reporting requirements. Shares delivered which are subject to claw-back are likely to be "restricted securities". If they are, the acquisition of those shares will need to be reported as such, and there will be a further reportable event when claw-back ceases to apply. The reporting (and tax) requirements are simpler if a restricted securities election under s431 Income Tax (Earnings and Pensions) Act 2003 is made when the shares are acquired. This election has the effect that the shares are taxed based on their full value, disregarding the claw-back, at the time of acquisition, with no further tax or reporting obligations when claw-back ceases to apply.
For tax-advantaged arrangements (approved schemes and EMI options), specific forms are required, which will generally be sent to relevant companies by HMRC.