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HMRC internal manual

Compliance Operational Guidance

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HM Revenue & Customs
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Supporting guidance: employer compliance guidance by subject: employment related securities: Schedule 4 Company Share Option Plan (CSOP): 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 plan by 6 July following the end of the tax year in which the first grant date falls, the notice of enquiry must be given by the following 6 July within 12 months (paragraph 28F(2)(a).

Example

HALO Ltd grant the first option under a Company Share Option Plan (CSOP) on 31 August 2014 (2014-15). The company must notify HMRC by 6 July 2015. They submit their declaration on 30 April 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 (paragraph 28f(2)(b)

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 grant date falls, 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 grant date falls, 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 scheme 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 tax advantaged status 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.

 

Example 1

GMB Ltd grant the first option under a CSOP on 1 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 tax year in which notification is received, and therefore the first year the scheme is tax advantaged, is 2015-16. The notice of enquiry can be given anytime up to and including 6 July 2017.

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

Example 2

GMB Ltd grant the first option under a CSOP 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 is submitted. If an amended return is received the notice of enquiry must be issued within 12 months from the date the amendment 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.

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 to not meet the requirements, this may give you reasonable grounds to enquire into the old scheme.