Compliance with EMI Share Option Scheme Annual Reporting

Compliance with EMI Share Option Scheme Annual Reporting

Compliance with EMI Share Option Scheme Annual Reporting

Once a company has set up and is operating an EMI share scheme, more often than not, those at the company managing the scheme only diarise for the dates on which certain employees’ options will vest and be capable of exercise. Unfortunately, there is an additional date which needs to be added to the diary – this is the EMI Annual Reporting Deadline.

What is EMI Annual Reporting?

EMI Annual Reporting is a compulsory return which companies operating an EMI share scheme are required to file annually online with HMRC under paragraph 52A, Schedule 5, ITEPA 2003.

The report contains certain updates and declarations to HMRC on the operation of the scheme, so as to enable HMRC to keep an up-to-date record of the company affairs.

The filing must have been made by 06 July of each year. Despite this being compulsory HMRC do not send out any filing reminders. This is why it is incredibly important to diarise for this in advance.

What is included in the report?

The report must contain the following:

  • The exercise of any EMI options (taxable and non-taxable exercises are reported on separate sheets);
  • The release, lapse or cancellation of any EMI options;
  • A rollover of any EMI options;
  • An adjustment of any EMI options.

It is important to note that even when nothing has happened within the EMI scheme during the tax year, companies must still report this to HMRC – this is called a ‘Nil Return’.

HMRC has provided templates for providing data on EMI options.

The company can use its own worksheets, but they must be in exactly the same format as HMRC’s templates. To assist, HMRC has provided a guidance note for companies creating their own templates.

Please note that templates will be rejected if dates are incorrectly formatted, and empty lines in templates will mean that any data below the empty line will not be captured.

If you are unsure on the formatting of your return, you can utilise the ‘test submission’ facility operated by HMRC. This allows you to check that the formatting is correct, and make amends where necessary, before finally submitting the return.

How to submit the report?

To file EMI annual returns, companies can do so through the PAYE online service using a Government Gateway user ID and password. Please note that the annual return is an additional service offered in the menu of available services in the PAYE online service dashboard.

Alternatively, companies can appoint an agent to complete the return on their behalf, for example their accountant. To do so, the company must already be registered for PAYE online and will be required to ‘register’ the agent as having the relevant authority. This can take up to two weeks to be issued by HMRC and so this should be factored into the timetable for submitting returns.

The successful online submission of a share scheme return will be acknowledged by HMRC. Information on the form this acknowledgement will take is not available, but in our experience, as for other online filing services, it is likely to be an electronic or email acknowledgement.

What if I complete the return incorrectly?

Human error happens, and if a mistake in an EMI return is discovered by the company, the legislation requires that the company give an amended return correcting the position “without delay”.

There is no clear definition of what timeframe this allows for, but we would always advise that as soon as you become aware of any inconsistencies or inaccuracies, you look to correct this immediately.

What if I don’t comply with the above?

HMRC has a penalty regime for late or inaccurate returns.

Late/Outstanding Returns:

  • If returns are late, there is an initial fixed penalty of £100;
  • If returns remain outstanding more than three months after the deadline, there is a further fixed penalty of £300;
  • If returns remain outstanding more than six months after the deadline, there is a further fixed penalty of £300; and
  • If returns remain outstanding more than nine months after the deadline, a penalty of £10 per day may be imposed by HMRC from a date it specifies in a notice to the company.

Inaccurate Returns:

HMRC can impose a penalty of up to £5,000 for a material inaccuracy in a return which it is deemed to be careless or deliberate, or which is not corrected by an amended return “without delay”.

What if I receive a penalty?

Penalties must be paid within 30 days of the notice being given or, if the penalty is appealed, within 30 days of the appeal being determined.

The company may appeal both the decision to assess a penalty and the amount and any appeals must be made to HMRC within 30 days of the HMRC’s penalty notice being given.

How can we help?

At the Jonathan Lea Network, we regularly support and advise companies with regards to EMI share options schemes and other employee equity incentive arrangements. If you would like advice and assistance on this or any other related matter, please send an email to or complete this form to arrange a free 20-minute consultation.

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited 2023.

About Jonathan Lea

Jonathan is a specialist business law solicitor who has been practising for over 18 years, starting at the top international City firms before then spending some time at a couple of smaller practices. In 2013 he started working on a self-employed basis as a consultant solicitor, while in 2019 The Jonathan Lea Network became a SRA regulated law firm itself after Jonathan got tired of spending all day referring clients and work to other law firms.

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