Company Share Option Plan: guidance notes — from 2023 to 2024 tax year

Question 1

1. Guide to completing Company Share Option Plan (CSOP) annual return attachment

Accepted Answer

The company secretary or the person acting as the company secretary must complete an online end-of-year return on or before 6 July for each registered and self-certified Schedule 4 Company Share Option Plan (CSOP) scheme.

The CSOP attachment only needs to be completed and then uploaded where there are outstanding qualifying options and there has been CSOP options activity in the tax year.

You will need to complete an online ‘nil’ return if you have registered the scheme online and there are no outstanding qualifying options , or there are outstanding qualifying options but there has been no CSOP options activity in the tax year.

Complete only the worksheets that are relevant but upload the whole workbook, including any blank sheets. If you change the structure or formatting of your attachment it will be rejected.

If you have created your own comma separated values (CSV) files using the HMRC provided technical note, upload each CSV file that contains data relevant to that scheme type. The comma separated values template you have created must accurately match the exact wording on the HMRC technical note. You must make sure all punctuation and grammar match. If the column does not accurately match the technical specification, it will not be possible to submit the file successfully.

You can use the Employment Related Securities (ERS) checking service to check your attachment. The checking service will tell you if and where there are any formatting errors in your attachment. You can use the checking service as often as you like. Checking your attachments regularly allows you to identify and correct these errors. This makes it easier to submit your return at the end of the year. The checking service is accessed through ‘view my schemes and arrangements’ on the online ERS service.

1.1 General guidance on valuations

All values should be entered in pounds sterling and pence and entered to 4 decimal places. Where necessary, round up figures ending in 5 or more and round down figures ending in 4 or less. You should use any reputable currency convertor to convert to pounds sterling if the value is quoted in another currency.

There is no change in valuation practice with the introduction of the templates. It is not necessary to have formally agreed the valuation of shares and securities with HMRC. However, where shares are not listed on a recognised stock exchange, you may have asked for a valuation from HMRC. If you agreed a valuation with HMRC then provide the reference number on the attachment. If the number is prefixed with ‘Company Reference Number (CRN)’ do not enter those letters. If you did not get a valuation you should continue to retain records of how you reasonably established the valuation.

1.2 Actual Market Value (AMV)

AMV is the value of a share or security after taking into account any restrictions or risk of forfeiture.

1.3 Unrestricted Market Value (UMV)

UMV is the value of a share or security ignoring any restrictions or risk of forfeiture.

1.4 Recognised stock exchange

AIM is not a recognised stock exchange. You can find out more about recognised stock exchanges in Recognised stock exchanges: definition, legislation and tables.

1.5 General guidance on completing the attachment

You must use the required formats when answering a question or a column requires an entry. If a question does not apply or is not mandatory, leave the entry blank.

Entering ‘N/A’ or ‘not applicable’ will result in your attachment being rejected. You can read the technical note to find out if a field is mandatory, conditional mandatory or optional and this will explain the formatting required for each question.

Where a question or column requires a yes/no entry, the following formats are acceptable:

Yes
yes
YES
No
no
NO

Question 2

2. CSOP_OptionsGranted_V5 worksheet

Accepted Answer

Use this worksheet to tell HMRC about any CSOP options you’ve granted in the tax year.

2.1 Question 1: Date of grant (yyyy-mm-dd)

Enter the date the CSOP options were granted to the employees. The date will be on the option certificate and it must be within the tax year covered by this return.

2.2 Question 2: Number of employees granted options

Enter the total number of employees granted CSOP options on this grant date.

2.3 Question 3: Over how many shares in total were CSOP options granted, for example 100.00

Enter the total number of shares to 2 decimal places and NOT the value of the shares granted under CSOP options on this grant date.

Enter the market value of a share ignoring any restrictions or the risk of forfeiture and this should be entered to 4 decimal places. How the option exercise price is to be determined will be explained in the company’s CSOP scheme rules.

Enter the price at which the employee was granted the option. It is the price the employee will pay for each share on the exercise of the share option. This should be entered to 4 decimal places.

Since Finance Act 2013, CSOP options can be granted over certain restricted shares. In some cases it is possible to have a higher exercise price than the UMV. The exercise price cannot be lower.

2.6 Question 6: Are the shares under the CSOP option listed on a recognised stock exchange? (yes/no)

If you enter ‘no’, read question 7.

If you enter ‘yes’, read question 9.

AIM is not a recognised stock exchange.

2.7 Question 7: If no, was the market value agreed with HMRC? (yes/no)

The market value of shares under CSOP options can be agreed with HMRC in advance of the date of grant of options.

Enter ‘yes’ if the market value was agreed in advance and read question 8.

Enter ‘no’ if it was not agreed in advance and read question 9.

2.8 Question 8: If yes, enter the HMRC valuation reference given

The HMRC valuation reference will be on the valuation letter sent to you from the Shares and Assets Valuation office. The reference given will normally be your Company Reference Number (CRN). Enter the full reference including the letters and numbers. If the beginning of your reference has 3 letters, only include the numbers.

2.9 Question 9: Using UMV at the time of each relevant grant, does any employee hold unexercised CSOP options over shares totalling more than £60,000 including this grant?(yes/no)

Enter ‘yes’ if an individual holds over the £60,000 limit. You must register a separate non-tax advantaged scheme or arrangement and report the grants over the individual CSOP limit on the ‘other’ attachment.

Question 3

3. CSOP_OptionsRCL_V5 worksheet

Accepted Answer

Use this worksheet to tell HMRC about options released (including exchanges), cancelled or lapsed in the tax year. Where an option is released, exchanged, cancelled or lapsed and no consideration was received do not complete this sheet. No information is needed for this event.

3.1 Question 1: Date of event (yyyy-mm-dd)

Enter the date the option is released (including exchanges), cancelled or lapsed for a consideration.

3.2 Question 2: Was money or value received by the option holder or anyone else when the option was released, exchanged, cancelled or lapsed? (yes/no)

You should only complete this worksheet if the individual employee or anyone else received money or money’s worth when the CSOP options were released (including exchanges), cancelled or lapsed.

‘Money’s worth’ means something that is:

of direct monetary value to the individual employee or someone else
capable of being converted into money or something of direct monetary value to the individual employee or someone else

3.3 Question 3: If yes, amount or value for example 10.1234

The amount or value should be to 4 decimal places.

3.4 Question 4: Employee first name

This is the employee’s first name.

3.5 Question 5: Employee second name (if applicable)

If the employee’s second name is not available or they have no second name, leave blank.

3.6 Question 6: Employee last name

This is the employee’s last name.

3.7 Question 7: National Insurance Number

In most cases, individuals included on an ERS end of year return should have a National Insurance Number (NINO). However, there may be some exceptional circumstances where an individual needs to be included on a return but does not have a NINO. In these circumstances, an alternative reference should only be used on the ERS end of year return it should not be used in any other correspondence.

This reference is not a NINO and should not be given to the individual or used in any other correspondence with HMRC.

Where there are exceptional circumstances, the required format for the alternative ERS reference will be a total of 9 characters. This will be 2 letters, 6 numbers and 1 letter consisting of:

TN ― to indicate an ERS reference
Employee Date of Birth in format DDMMYY (for example, 080403) ― this data will enable HMRC to trace the individual
No NINO Reason Identifier (X, Y or Z) ― this is to identify the reason why an individual does not have a NINO
X ― Under 16 years old
Y ― Applied for a National Insurance number and is waiting to receive it
Z ― Never paid National Insurance contributions (NICs) as they have not been liable to UK NICs, for example they’re not resident in the UK or are an ‘intra-company worker’ on transfer to work in the UK

3.8 Question 8: PAYE reference of employing company.

Enter the PAYE reference number of the employee’s employing company. The employing company should be the company that has the PAYE obligation.

3.9 Question 9: was PAYE operated? (yes/no)

Income Tax and National Insurance Contributions (NICs) will be payable on the amount of money or money’s worth received. The Income Tax and NICs is payable through PAYE. Enter ‘yes’ or ‘no’ in this field.

Question 4

4. CSOP_OptionsExercised_V5 worksheet

Accepted Answer

Use this to tell HMRC about options exercised in the tax year.

4.1 Question 1: Date of event (yyyy-mm-dd)

Enter the date option was exercised by the employee.

4.2 Question 2: Employee first name

This is the employee’s first name.

4.3 Question 3: Employee second name (if applicable)

If the employee’s second name is not available, or they have no second name, leave blank.

4.4 Question 4: Employee last name

This is the employee’s last name.

4.5 Question 5: National Insurance Number

In most cases, individuals included on an ERS end of year return should have a National Insurance Number (NINO). However, there may be some exceptional circumstances where an individual needs to be included on a return but does not have a NINO. In these circumstances, an alternative reference should only be used on the ERS end of year return it should not be used in any other correspondence.

This reference is not a NINO and should not be given to the individual or used in any other correspondence with HMRC.

Where there are exceptional circumstances, the required format for the alternative ERS reference will be a total of 9 characters. This will be 2 letters, 6 numbers and 1 letter consisting of:

TN ― to indicate an ERS reference
Employee Date of Birth in format DDMMYY (for example, 080403) — this data will enable HMRC to trace the individual
No NINO Reason Identifier (X, Y or Z) ― this is to identify the reason why an individual does not have a NINO
X ― Under 16 years old
Y ― Applied for a National Insurance number and is waiting to receive it
Z ― Never paid National Insurance contributions (NICs) as they have not been liable to UK NICs, for example they’re not resident in the UK or are an ‘intra-company worker’ on transfer to work in the UK

4.6 Question 6: PAYE reference of employing company

Enter the PAYE reference number of the employee’s employing company. The employing company should be the company that has the PAYE obligation.

4.7 Question 7: Date of grant (yyyy-mm-dd)

Enter the date CSOP options were granted to the employees. The date will be on the option certificate.

4.8 Question 8: Total number of shares employee entitled to on exercise of the option before any cashless exercise or other adjustment for example 100.00

Enter the number of securities to 2 decimal places the employee is entitled to acquire from this exercise. This is the gross number of shares ignoring shares withheld to pay for tax and National Insurance Contribution (NIC) or the exercise price.

For example, an employee has options over 200 shares and chooses to exercise the option to acquire 100 shares. Forty of those shares are withheld to pay for the employee’s Income Tax and NIC liability. You enter 100 in this field.

4.9 Question 9: Are these shares part of the largest class of shares in that company? (yes/no)

Some companies create different classes of ordinary share, for example ’A’ and ‘B’ ordinary shares.

The largest class of share is the class of shares with entitlement to the largest proportion of value (£) on a winding-up.

If you only have one class of share, enter ‘yes’. If you have more than one class of shares and they are equal in value enter ‘yes’.

4.10 Question 10: Are the shares subject to the option listed on recognised stock exchange? (yes/no)

AIM is not a recognised stock exchange.

AMV is the value of a share or security after taking into account any restrictions or risk of forfeiture and should be entered to 4 decimal places.

Enter the price at which the employee was granted the option. It is the price the employee will pay for each share on the exercise of the share option. This should be entered to 4 decimal places.

Enter the market value of a share ignoring any restrictions or the risk of forfeiture to 4 decimal places.

4.14 Question 14: If the answer to question 10 is ‘no’, was the market value agreed with HMRC? (yes/no)

If you enter ‘yes’ read question 15.

If you enter ‘no’ read question 16.

4.15 Question 15: If yes, enter the HMRC valuation reference given

The HMRC valuation reference will be on the valuation letter sent to you from the Shares and Assets Valuation office. The reference given will normally be your Company Reference Number (CRN). Enter the full reference including the letters and numbers. If the beginning of your reference has 3 letters, only include the numbers.

4.16 Question 16: Does the exercise qualify for tax relief? (yes/no)

The answer will be yes if the option is exercised:

between the third and tenth anniversary of the date of grant
by a good leaver, subject to the scheme rules, before the third anniversary of the date of grant

4.17 Question 17: Was PAYE operated? (yes/no)

PAYE should have been operated if the shares are readily convertible into cash. There are exceptions for example where the employee left employment because of injury, disability or redundancy. Enter ‘yes’ or ‘no’ in this field.

If you enter ‘no’, read question 20.

4.18 Question 18: If yes, deductible amount for example 10.1234

You must enter the total amount of any:

amount paid for the grant of the option
expenses incurred for the acquisition of the securities

You must not enter any:

exercise price also often referred to as grant or strike price
expenses in connection with the sale or disposal of the securities
Employer’s NIC the employee may have agreed to pay under a joint NIC Agreement or Election
Income Tax

4.19 Question 19: Has a NICs election or agreement been operated? (yes/no)

This is when the employer and the employee agree or jointly elect for the employee to meet the employer’s liability to pay secondary NICs on certain types of share awards and share options gains. The employee can then get a deduction equal to the amount of secondary or employers’ NICs transferred when working out the amount chargeable to Income Tax.

4.20 Question 20: Were all shares resulting from the exercise sold? (yes/no)

Enter ‘yes’ if shares were immediately sold on exercise or instructions were given to sell on exercise. The application of a price limit should be disregarded.

Enter ‘no’ if any shares were retained or at a later point the employee decides they now want to sell the shares.

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