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HMRC internal manual

Compliance Operational Guidance

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HM Revenue & Customs
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Schedule 2 Share Incentive Plan (SIP): time limits for issuing an enquiry notice

The time limits for issuing the notice of enquiry are as follows:

Scheme notified by 6 July following the end of the tax year in which the first award or grant is given

Where the company notifies HMRC of a scheme by 6 July following the end of the tax year in which the first award is given, the notice of enquiry must be given by the following 6 July (see Paragraph 81F(2)(a)).

Example

XYZ Ltd set up a Share Incentive Plan (SIP) on 1 August 2014. The first award of shares is made to employees on 1 September 2014 (2014-15). The company must notify HMRC by 6 July 2015. They submit their declaration and return on 1 July 2015. The notice of enquiry must be given by no later than 6 July 2016.

Scheme not notified by 6 July following the end of the tax year in which the first award or grant is given

The time limits for issuing the notice of enquiry depend on when the scheme is tax advantaged from.

  • Where the scheme is notified after 6 July following the end of the tax year in which the first award is given, HMRC may send a notice of an enquiry into the declaration no later than 6 July in the second year following the ‘relevant tax year’. The ‘relevant tax year’ is the tax year in which notification of the plan is given (see Example 1).
  • Where the scheme is notified before 6 July of the tax year in which the first award is given, HMRC may send a notice of an enquiry into the declaration no later than 6 July in the second year following the ‘relevant tax year’. The ‘relevant tax year’ is the preceding tax year (see Example 2).
  • The company SIP will not qualify for tax advantaged status retrospectively. Therefore if the scheme is notified after 6 July following the end of the tax year in which the first award is given it doesn’t qualify as a tax advantaged status scheme until the tax year notification is given. HMRC may send a notice of enquiry no later than the 6 July in the second year following the ‘relevant tax year’. The ‘relevant tax year’ is the tax year in which notification of the plan is given.

Example 1

ABC Ltd set up a Share Incentive Plan (SIP) on 1 December 2014. The first award of shares is given to employees on 24 December 2014 (2014-15). The company must notify HMRC by 6 July 2015 but does not give notice of the plan until 31 August 2015. The ‘relevant tax year’ is 2015-16. The notice of enquiry can be given anytime up to and including 6 July 2017.

Note: The SIP will not have tax advantaged status for 2014-15.

Example 2

ABC Ltd set up a SIP in on 1 March 2015. The first award of shares is given to employees on 2 July 2015 (2015-16). The company must notify HMRC by 6 July 2016 but gives notice of the plan on 5 July 2015. The notice of enquiry can be given anytime up to and including 6 July 2017.

Annual return includes a declaration that an amendment has been made to a key feature and the requirements are still met

The notice of enquiry must be issued within 12 months from the date the return containing the declaration is submitted.

Reasonable grounds for believing the requirements are not met

The time limit for issuing a notice of enquiry can be extended if HMRC has reasonable grounds for believing the relevant requirements are not met or have not been met.

“Reasonable grounds” is not defined in statute and the natural meaning applies. For example:

  1. Where you establish that the requirements are not met in one year, you may have reasonable grounds to believe the requirements have not been met in earlier years.
  2. Where you open an enquiry into a declaration on the annual return notifying an alteration to key features, this may give you reasonable grounds to look at the plan before the changes were made
  3. Where a company is taken over by another company and the new scheme rules are the same as the old scheme, if the new scheme is found not to meet the requirements this may give you reasonable grounds to enquire into the old scheme.