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Whenever companies issue shares to employees and directors, they need to consider whether or not an entry needs to be made on the end of year HMRC Form 42. This form is used to report events relating to shares and securities obtained by reason of employment and now needs to be submitted online by 6th July following the end of the tax year.

Remember that where the shares are issued at an undervalue there is potentially a charge to employment income. Note that there are a number of exceptions from the need to make a report and that different forms are used to report shares acquired under tax-advantaged schemes such as EMI share options which we referred to last month.

The main exceptions from the reporting obligation are where shares are issued in connection with incorporation and where there is a transfer of shares in the normal course of the domestic, family or personal relationships. An example of the latter would be the gift of shares from father to son or daughter as part of an estate planning exercise. However, HMRC guidance states that there must be no element of remuneration in the award or grant. Please contact us for assistance whenever you are considering the transfer of shares to family members or other employees.