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What is a s431 election form?

What is a s431 election form?

The section 431 election is a legal document that confirms the employee or recipient of the share agrees to certain terms in order to be subject to capital gains tax (CGT) as opposed to income tax and National Insurance when the shares are sold.

Do I need a s431 election?

What is a section 431 election and why do I need to make one? It is common in corporate transactions, where shares are being transferred or issued to employees or directors, for the individuals concerned to be asked (or even required) to complete a section 431 election.

Can a company make a s431 election?

The conditions for an election under ITEPA03/S430 or ITEPA03/S431 are the same as for an election under ITEPA03/S425 (3) (ERSM30370): the election must be made by the employer and the employee jointly; it must be made not more than 14 days from the date of the acquisition, or the chargeable event; and.

What is a joint election under s431?

Provided the director/ employee pays the full UMV for their shares as at the time of their acquisition and makes an election within 14 days to say they have done so (the s431 election), they will not be required to pay an income tax charge on the future growth in the value of the shares when they are eventually sold.

What is an EMI scheme?

An Enterprise Management Incentive (“EMI”) scheme is an approved employee share scheme that is available to most trading companies, allowing employers to grant share options to key employee’s tax efficiently, as a reward for their efforts within the business and/or to retain and incentivise key staff.

What is a reportable event for Form 42?

What’s reportable? Every employment related securities event is reportable. The only exceptions are: Newly incorporated companies • Newly incorporated companies – allotment of further shares • Shares acquired by the company formation agent • HMRC Approved Schemes.

What is a UK EMI scheme?

What are EMI options UK?

An Enterprise Management Incentive, or EMI, is a government‑backed, tax-advantageous share options scheme. It is mainly used by small to mid-sized UK businesses looking to share their successes with their team as their company grows.

Does Form 42 still exist?

The old paper Form 42 has been replaced by a spreadsheet that must be completed and uploaded to HMRC via PAYE online. It can only by uploaded if an Employer has registered for the Employment Related Securities service, via PAYE online. See Shares, securities and options: tax compliance.

What is the purpose of Form 42?

A Form 42 is an annual tax information return form. It is primarily used by HMRC to check that the correct amount of tax has been paid by employers and employees in respect of ‘reportable events’ concerning shares and securities acquired by employees.

How do I register for EMI with HMRC?

How do I register a new EMI Scheme with HMRC?

  1. Once in the ERS system select Register a scheme and then select Enterprise Management Initiatives (EMI).
  2. Next you’ll need to enter the details of the scheme.
  3. The next page is a summary of the information you’ve entered and gives you the opportunity to make changes if needed.

How do I set up an EMI scheme?

The EMI scheme set-up process

  1. Establish if your company and employees are eligible for EMI.
  2. Design the EMI scheme.
  3. File with HMRC for valuation agreement.
  4. Obtain corporate authorisations including establishing employee share pool.
  5. Grant the first round of share options to employees.

What happens to EMI options after 10 years?

All EMI option contracts are valued for a timeframe of 10 years only. If your business was working towards an exit, usually in the form of a sale, and this hasn’t happened in the first 10 years following the issue of the options, then the result is they will lapse.

What is Form 42 called now?

The old paper Form 42 has been replaced by a spreadsheet that must be completed and uploaded to HMRC via PAYE online. It can only by uploaded if an Employer has registered for the Employment Related Securities service, via PAYE online.

What replaced Form 42?

Form 42 was replaced by online filing with effect from the tax year 2014-2015. Employers must first register their share scheme or arrangement with HMRC in order to file online.

Is Form 42 still required?

All reporting for the tax year ending 5 April 2022 must be done through the HMRC Employment Related Securities (ERS) online service (formerly Form 42). This is available for companies to register with now and it forms part of the PAYE for employers online service. All annual returns must be filed by 6 July 2022.

What is EMI HMRC?

In brief: EMI stands for Enterprise Management Incentive. This is a share option scheme backed by HMRC in the UK, designed for employees or directors working for more than 25 hours per week (75% of their time) in a business.

How do I register an EMI scheme with HMRC?

Who can set up an EMI scheme?

Secondly, there are requirements that your business must meet to qualify for EMI: Your company must be independent. More than 50% of the ordinary share capital must not be owned or controlled by another company, either now or in the future. If your company has any subsidiary companies, they must also qualify for EMI.

Are EMI options tax free?

There is no tax on grant of an EMI option. The exercise of EMI options is not subject to income tax or employees’ National Insurance Contributions, provided the shares are purchased at a price which is at least equal to their market value when the employee was granted the option.

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