Property investors must notify HMRC of share transactions

Chris Street

10th May 2017

Advice for property businesses from Optimise Accountants

By Louise Misiewicz

Do you own a property-based business in the UK?

Have you informed HMRC of any share transactions?

As leading providers of specialist property tax advice, my team have been advising property landlord clients this week on imminent legislation coming up from HMRC which affect all property businesses.

As of 6th July, HMRC requires all companies to notify them on a large range of transactions based on share and stock activities. This is taken to include shares, load stock and debentures held by property company employees or persons connected to the company in a Director-level association.

What are you required to do as a property business owner?

If you’re the owner of a property-based business, your company must take action to comply with these obligations to minimise the risk of losing valuable tax reliefs and incurring penalties.

The notification requirement covers any company that operates an unapproved share plan for employees or Directors. If you’re running a Limited Company for your property portfolio, this includes you.

It also covers companies in which employees or Directors have acquired shares or securities. In most cases, any share transactions involving employees or Directors are also reportable to the HMRC.

With the change to the online registration also comes a change in who must deal with certain aspects of the registration and notification process.

Only the company can perform the initial registration of its share plans. The ERS service is part of the existing PAYE online service, and companies can select to add this service whilst logged onto the HMRC website here.

The deadline to register the creation of a share plan or the issue of shares within the tax year to 5th April 2017, as well as the submission of the separate annual return notifications online with HMRC, is 6th July 2017. Registration for the online service can take at least a week, it is recommended to register well in advance of the 6th July. If you’re unsure of how to proceed, please feel free to get in touch with us here.

Common events that are disclosed in the notification (formerly Form 42) can include:

  • the issue or transfer of securities;
  • the grant  or exercise of share options or of other rights to acquire shares;
  • the assignment or release of taxable securities options for consideration;
  • a rights issue or a bonus issue to employees by an employing company;
  • a change in the rights of shares held by employees;
  • a sale of securities that are ‘restricted’

A return must be submitted for every share plan registered, even if it is a nil return. HMRC will no longer issue notices to file or reminders, and it is now the responsibility of the property company owner to first register online so that the appropriate annual return notifications may then be made.

Failure to file an annual return by 6th July will result in automatic penalties.

Initially, a £100 penalty for missing the deadline will apply, plus additional penalties of £300 after three and six months if the return is still outstanding. If the return is more than nine months late, a further penalty of £10 per day may also be charged. Penalties of up to £5,000 can also be applied for failure to submit the return in an electronic format or for careless or deliberate errors.

Is your property business up-to-date with tax notifications?

I would say that if you’re unsure of your current level of tax liability in any area, or if you’re unsure about your notification of share transactions, get in touch with me and my team immediately.

These recent articles I’ve written will also provide useful reading and reference for property business owners on key topics related to the main thrust of this article on HMRC requirements:

How to reduce tax liability in 2017

Using property losses to reduce tax

Structuring your property business

How to engage with us

If you want to understand how to implement the elements raised in this article or to discuss other finance/tax questions then please book some time with us using the below calendar.

Please use the redeem code “Article 33” to get 33% off your next consultation call.

If you are looking for a new accountant, then please book some time with us using the below calendar.

Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.

Book a call to see how we can help you.