28 July 2020
HMRC has published its latest Employment Related Securities bulletin here. The bulletin provides further guidance and clarity on HMRC’s proposals for managing the impact of Covid-19 on share plans and share plan filings with HMRC.
Sharesave / SAYE (Save as You Earn)
Sharesave participants can take a holiday from their savings contracts without terminating their participation in the plan. This holiday period was limited to up to 12 months over the life of the savings contract (although the maturity date will be pushed back by the total number of months missed).
This latest bulletin, HMRC announced a new concession: the 12 months limit will not apply, provided the reason for the extra delay is related to the coronavirus. All employees with a savings contract in place on 10 June 2020 can delay the payment of monthly contributions beyond 12 months in these circumstances.
This bulletin gives more guidance in terms of how this concession will work in practice. It sets out a number of examples to show how the 12 months savings holiday extension can operate. These include:
- If a SAYE participant had postponed their contributions up to the maximum 12 months, resumed payments on the 13th occasion and then became furloughed or on unpaid leave and needed to postpone contributions, then they will benefit from the extended savings holiday concession.
- If a participant had postponed SAYE payments by up to 11 months in February 2020, became furloughed in March 2020 and so missed contributions in April and May, a total of 13 months payments will have been missed. If the missed payments were the result of coronavirus then the extended savings holiday concession will apply.
- Participants who were due to resume payments into a SAYE plan on the 13th occasion, in March 2020, but who were then furloughed or took unpaid leave due to coronavirus and who were then unable to afford to resume payments, will be able to benefit from the extended savings holiday concession.
EMI (Enterprise Management Incentive Plans)
HMRC provided welcome confirmation that participants in EMI schemes who may have been unable to meet the EMI “working time requirement” of at least 25 hours per week (or if less, at least 75% of their working time) as a result of the pandemic will still be able to retain the benefits of these tax efficient options. From 19 March 2020, if an employee would otherwise have met the working time requirements but did not do so for reasons connected to the coronavirus pandemic, the reduction in working time will not be a “disqualifying event” and the time which they would otherwise have spent on the business of the company will count towards their working time.
HMRC lists acceptable reasons for the working time reduction as being placed on furlough, simple reduction of hours or unpaid leave – and the reason in all cases must be caused by the pandemic. The period in which the reduction occurred must have begun on or after 19 March 2020.
In their last bulletin, HMRC reiterated that filing deadlines will not be extended. In this bulletin, HMRC confirms that failure to register a plan or make a share plan filing by the required deadline due to the pandemic may be treated as a reasonable excuse.
Due the automated nature of the registration and return submission process, late filing penalties will be imposed automatically once the deadline has passed. Companies must then appeal such penalties. HMRC say that affected companies should explain how they are affected by the coronavirus pandemic when they make their appeal.
HMRC has requested that enquiries are submitted by email rather than post, but have confirmed that postal enquiries can still be received. HMRC warns that there are some delays in post reaching the Revenue’s Share Schemes team.
The payment holiday extension is a welcome concession for Sharesave plans, although we understand that it (so far) has not been used extensively. All employees with a savings contract in place on 10 June 2020 can delay the payment of monthly contributions beyond 12 months if they fall into the required circumstances. There is a new savings prospectus in place setting out this new rule. As we noted when the last bulletin was issued, your Sharesave plan terms should be checked to see whether and how the new payment holiday rules can operate in practice, and employee facing guidance will need to be updated too. Please do let us know if we can help with this.
The EMI concession is also welcome – it will be a huge relief to affected participants who might otherwise have lost out on potentially substantial tax savings available under EMI.
Finally, HMRC have not moved on extending the filing deadline for share plan reporting. The 6 July deadline came and went with late filing penalties being levied automatically. Where the delay was caused by coronavirus related complications, HMRC may permit this as a reasonable excuse for late filing, but this is not an automatic concession, and appeals will have to made by companies caught by these penalties.
If we can help with this, or if you have any questions about this alert, please do contact us.
Sarah Bruce & Chris Fallon