ETASSUM56020 - Enterprise Management Incentives (EMI): Option notifications: Notifying Errors in options to HMRC

Paragraph 45, Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

From 6 April 2014 with the introduction of the online ERS service there is no functionality in the service to allow correction of notifications submitted electronically either by the employer or HMRC. You should therefore proceed as follows:

If the error is not significant, for example a spelling error, then HMRC advise you to keep a note in your records of the error in the notification of EMI options. The note should have details of the employees and date of grant of the EMI options notified. You may need to produce this note if there is a compliance enquiry into your EMI options.

In other circumstances or where options have been incorrectly granted, for example the option grant documentation did not refer to the correct number of shares, depending on all the facts, it may be that the option needs to be cancelled and a new option needs to be granted. You can contact HMRC in cases of uncertainty.

For options granted on or before 5 April 2024, if you realise you made a notification mistake

  • within 92 days of granting the original options, then those options can simply be re-notified because it’s still within the 92 day deadline of grant. You should cancel the originally notified options in the next EMI annual return as if they were options cancelled for no payment.
  •  after 92 days of granting the original option but within 9 months of notifying HMRC of the grant of the original option and you believe you have a reasonable excuse for not having re-notified within the original 92 day deadline, then you should advise HMRC of all the facts including the date of the grant of options; the name of company; the scheme name and the unique scheme reference number (as allocated by ERS service). If they accept your reasonable excuse a code will be issued to allow you to re-notify (in ERS online) the corrected options. You must then remember to cancel the originally issued incorrect options when you complete and file your next ERS annual return.
  • after 9 months of notifying HMRC of the grant of the orginal option, then it is HMRC’s view that it cannot be corrected, regardless of whether or not the error is considered significant. In such circumstances you should disclose such errors to us so that we can consider whether or not the error was material at that time and whether that may lead to the option not meeting the legislative requirements to qualify for tax advantaged treatment.

For options granted on or after 6 April 2024, if you realise you made a notification mistake 

  • up to 6 July following the end of the tax year in which the original options were granted, then those options can simply be re-notified because it’s still within the deadline to notify a grant. You should cancel the originally notified options in the next EMI annual return as if they were options cancelled for no payment. 

  • after 6 July following the end of the tax year in which the original options were granted but this is within 9 months of notifying HMRC of the grant of the original option and you believe you have a reasonable excuse for not having re-notified within the original deadline, then you should advise HMRC of all the facts including the date of the grant of options; the name of company; the scheme name and the unique scheme reference number (as allocated by ERS service). If they accept your reasonable excuse a code will be issued to allow you to re-notify (in ERS online) the corrected options. You must then remember to cancel the originally issued incorrect options when you complete and file your next ERS annual return. 

  • after 6 July following the end of the tax year in which the original options were granted, but this is after 9 months of notifying HMRC of the grant of the original option, then it is HMRC’s view that it cannot be corrected, regardless of whether or not the error is considered significant. In such circumstances you should disclose such errors to us so that we can consider whether or not the error was material at that time and whether that may lead to the option not meeting the legislative requirements to qualify for tax advantaged treatment. 

If you need to contact HMRC about an error in the notification then write to Charities, Savings & International 1, HM Revenue & Customs, BX9 1BU or email to [email protected]