Schedule 4 Company Share Option Plan (CSOP): General requirements: Notification & registration
From 6 April 2014 a scheme is a “Schedule 4 CSOP scheme” if the company has given notice of the scheme to HMRC within the appropriate time limit and has confirmed that the scheme meets the requirements of parts 2-6 of Schedule 4 (paragraph 28A(A1)). The scheme is a Schedule 4 CSOP scheme from the date of the notice or, if the notice is given after the first share options have been granted, from the date of the first grant of options (paragraph 28A(4)).
Notice must be given by 6 July following the end of the tax year in which the first grant of options is made under the scheme. If notice is given after this date, the scheme can only be a “Schedule 4 CSOP scheme” from the tax year in which the notice is given (paragraph 28A(5)).
The notice must contain a declaration by the company secretary confirming that the Schedule 4 CSOP scheme meets the requirements of parts 2-6 of Schedule 4 at the time the notice is given.
Where notice is given after the date of the first grant, the company secretary must certify that the requirements were met:
- at the time of the first grant, and
- at all other times after the first grant while unexercised share options exist under the scheme.
Options granted before 6 April 2014 under a scheme which had been approved by HMRC before that date, are deemed to be granted under a Schedule 4 CSOP scheme (paragraph 212(5)–(6) Schedule 6 FA 2014). The tax exemptions and other provisions within Chapter 8 of part 7 ITEPA therefore apply to these options so long as the notification requirements are met.
Where a scheme has been approved by HMRC prior to 6 April 2014, the company must notify and self certify the scheme on or before 6 July 2015 if it wishes the scheme to continue to attract tax advantages for 2014-15 and following years. If schemes are not registered by this date, they will no longer be tax advantaged. The interests of scheme participants granted options prior to 6 April 2014 which remain unexercised will not be protected in cases where the 6 July 2015 deadline has been missed.
As a notice under paragraph 28A must contain a declaration by the company confirming that the scheme meets the requirements of parts 2 – 6 of Schedule 4 at the time the notice is given, it is important that notice is given prior to any event that might cause a scheme to cease to meet the statutory requirements. For example when a SIP, SAYE or CSOP plan is set up and awards are then made or options granted, companies (for example) will become aware beforehand that an imminent takeover may cause the shares to cease to meet the statutory conditions (so causing the plan to fail to meet the statutory requirements). In these circumstances if the company still wants to notify the scheme to HMRC because tax relief may still be available, it must notify prior to the takeover. After the takeover the company will be unable to sign the declaration at paragraph 28A(3), as the requirements of Schedule 4 will not be met after that date. In these circumstances the scheme will only meet the requirements of parts 2-6 of Schedule 4 for the period from the date of first grant of option until the date of the relevant company event and only options granted in that period and exercised in accordance with the CSOP code will attract tax advantages.
The review document – (formerly checklist) can be used when considering whether the legislation governing Schedule 4 CSOP schemes is satisfied.
Guidance on establishing schemes is at ETASSUM41120.
Foreign companies may wish to establish schemes for employees of their UK subsidiary companies. Whilst it will be rare for a foreign scheme to satisfy the requirements of Schedule 4, it may be possible for:
- the subsidiary company or companies to set up free-standing schemes which fully satisfy Schedule 4, or
- an addendum to be made to the parent company’s foreign scheme, to disapply the unacceptable features of the foreign scheme and to import the rules which are required to satisfy Schedule 4, see ETASSUM41120.
Guidance on registering and self-certifying schemes can be found at https://www.gov.uk/topic/business-tax/employment-related-securities