Every year, companies with an EMI Scheme must submit an EMI end of year return to HMRC by 6 July. If you’ve previously registered an EMI scheme, you must complete the online end of year return.

HMRC provides an excel spreadsheet to complete the return. Please download and fill in the spreadsheet only if there has been activity in the tax year. If there hasn’t been activity in the tax year, you will submit a ‘nil’ return. For a nil return, skip the excel spreadsheet instructions in this article and scroll down to the bottom section, ‘Submitting a Nil Return’. We have provided general guidance and instructions on how to submit at the end of this article.

What is an activity?

There are four kinds of activity: Adjustments, replacements, lapses and exercises.

For most companies, the relevant activities are lapses and exercises, which we’ll cover here. If you also have replacement options, or adjustments, we have advice on how to report those are here.

Option Lapses

Lapses occur normally when someone leaves the company. Even if someone is allowed to keep their option after they’ve left the company, as per EMI rules the option will cease to qualify as an EMI Option 90 days after they have left the company, if it hasn’t been exercised - so from HMRC’s point of view, this will count as being lapsed and still needs to be reported.

Onto the spreadsheet:

Only fill in information about this tax year’s activity. That means activity before 6th April 2020. If someone’s option lapses after that, you should not report it - and wait until the next annual return.

Each employee with a lapsing option has a new row, starting with row 10. Fill in the answers to the questions on the excel sheet. If you get stuck, please have a look at our guidance below:

1. Date of event

Date the original EMI option was released, lapsed or cancelled.

2. Is the release, lapse or cancellation the result of a disqualifying event?

Please see below list of disqualifying events. Answer yes or no.

3. If yes, enter a number from 1 to 8 depending on the nature of the disqualifying event.

Please see below list of disqualifying events and enter the number next to the relevant disqualifying event.

Questions 4-8 are self explanatory. Please see excel spreadsheet.

9. Number of shares subject to the option which have been released, lapsed or cancelled.

Enter the number of options released, lapsed or cancelled. Enter the figure to 2 decimal places, rounding where necessary. If less than 2 decimal places, enter 0 to fill remaining decimal places.

10. Was money or value received?

Enter yes if any direct monetary value or anything that could be converted into direct monetary value was received by the employee for the release, lapse or cancellation of their options. If no, enter no and then no other questions to be answered.

11. If yes, enter the amount.

Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

12. PAYE operated?

Enter yes if the shares are readily convertible into cash.

Option Exercises - Non-Taxable

An Option could be exercised by an employee while they are with the company, or just after they leave the company. Most exercises will be ‘Non-Taxable’ exercises - provided you agreed a valuation from HMRC, and the exercise price of the option is the same as that valuation agreed.

Only fill in information about this tax year’s activity. That means activity before 6th April 2020. If someone’s option lapses after that, you should not report it - and wait until the next annual return.

Each employee gets a new row, starting with row 10. Fill in the answers to the questions on the excel sheet. If you get stuck, please have a look at our guidance below:

Questions 1-6 are self explanatory. Please see the excel spreadsheet.

7. Total number of shares employee entitled to on exercise of the option before any cashless exercise or other adjustment

This is just a fancy way of asking how many options were exercised. Enter the figure to 2 decimal places, rounding where necessary. If less than 2 decimal places, enter 0 to fill remaining decimal places.

8. AMV of a share on the date of the grant

Enter the AMV that HMRC accepted for these options. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

9. Exercise price per share

Enter the price at which the employee was granted the option. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

10. AMV of a share at date of exercise

This will be the same AMV as agreed with HMRC. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

11. Are the shares subject to the option exercised listed on a recognised stock exchange?

If no, enter no and go to question 12. If yes, enter yes and go to question 14

12. If no, was the market value agreed with HMRC?

If your valuation was approved by HMRC for this option grant, the answer here is yes.

13. If yes, enter the HMRC reference given.

The HMRC reference will be on the valuation letter sent to you from the Shares and Assets Valuation office. The reference will normally be your CRN. Enter only numbers, do not enter any letters.

14. Total amount paid for shares

Enter the amount the employee paid for the shares. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

15. Were all shares resulting from the exercise sold?

Enter yes if the shares were immediately sold upon exercise.

Option Exercises - Taxable

If you granted Options to an employee at below the market rate agreed with HMRC, or after 90 days of a disqualifying event (which includes if an employee chooses to exercise after the 90 day window), you’ll need to report it in this section.

Only fill in information about this tax year’s activity. That means activity before 6th April 2020. If someone’s option lapses after that, you should not report it - and wait until the next annual return.

Each employee gets a new row, starting with row 10. Fill in the answers to the questions on the excel sheet. If you get stuck, please have a look at our guidance below:

Questions 1-8 are self explanatory. Please see excel spreadsheet.

9. Total number of shares employee entitled to on exercise of the option before any cashless exercise or other adjustment

This is just a fancy way of asking how many options were exercised. Enter the figure to 2 decimal places, rounding where necessary. If less than 2 decimal places, enter 0 to fill remaining decimal places.

10. AMV of a share on the date of the grant

Enter the AMV that HMRC accepted for these options. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

11. Exercise price per share

Enter the price at which the employee was granted the option. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

12. AMV of a share at date of exercise

This will be the same AMV as agreed with HMRC. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

13. UMV of a share at date of exercise

If you’ve done your valuation with us, this will be the same value of the AMV. It is a value that HMRC accepts in your valuation report/VAL 231 Form. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

14. Total amount paid for the shares

Enter the total amount the employee paid for the shares. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

15. Is the company listed on a recognised stock exchange?

If no, enter no and go to question 16. If yes, enter yes and go to question 18.

16. Has the market value been agreed with HMRC?

If your valuation was approved by HMRC for this option grant, the answer here is yes.

17. If yes, enter the HMRC reference given.

The HMRC reference will be on the valuation letter sent to you from the Shares and Assets Valuation office. The reference will normally be your CRN. Enter only numbers, do not enter any letters.

18. Has an election under Section 431(1) been made to disregard restrictions?

This is referring to a Section 431(1) Election to disregard all or some restrictions.

19. Has a National Insurance Contribution election or agreement been operated?

20. Amount subjected to PAYE

Enter the amount put through the payroll for PAYE. Enter the figure to 4 decimal places, rounding where necessary. If less than 4 decimal places, enter 0 to fill remaining decimal places.

General Guidance

  • All values in the sheet should be entered in pounds and pence and entered to four decimal places -round up or down where necessary
  • If the value is quoted in another currency, then convert to pounds
  • Where AMV is mentioned, this is the value of the share after taking into account any restrictions
  • Where UMV is mentioned, this is the value of a share ignoring any restrictions
  • Where a question or column does not apply, leave the entry blank
  • The exercise price per share is the price at which the employee was granted the option
  • Here is a list of disqualifying events:

Submitting Your Return

When you’re done filling in the relevant sheets, please log into your online ERS service. Log in with your government gateway ID and password.

To ensure you haven’t made any formatting errors in your return, you should check your spreadsheet through HMRC’s service. When you’ve logged into the online ERS service, select ‘Services you can use’ in the left-hand menu. Click ‘PAYE for Employers’. Then click ‘View schemes and arrangements’ under ‘Employment Related Securities’ towards the bottom right-hand side of the page. Scroll to the bottom and click ‘Check your ERS files’ and follow the instructions provided.

The service will allow you to check as many times as you would like.

When there are no errors showing, go back to ‘View schemes and arrangements’ and select the registered scheme you are submitting an annual return for. Then you can submit your finished spreadsheet online.

Submitting A Nil Return

If no activity occurred in this tax year, you will submit a nil return. To do so, log into your online ERS service. Log in with your government gateway ID and password.

When you’ve logged into the online ERS service, select ‘Services you can use’ in the left-hand menu. Click ‘PAYE for Employers’. Then click ‘View schemes and arrangements’ under ‘Employment Related Securities’ towards the bottom right-hand side of the page. Then select the registered scheme you are submitting an annual return for. This will give you the question, 'Have options been adjusted replaced, released, lapsed, cancelled or exercised during the tax year?'. Select, 'No (nil return)' and click continue. Fill in the relevant information about the company.

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