Share options and share awards for UK employees
Options granted by the parent are taxed through the UK subsidiary's payroll and reported to HMRC every July, even where the plan is administered abroad. We register the plan, file the return and set up a UK-efficient plan where one is available.
Parent share awards through UK payroll and the July return
Options and restricted stock granted by an overseas parent are administered at head office, and the UK side is rarely told. On vesting they are UK employment income, taxable through the UK payroll, and every plan needs an HMRC return by 6 July whether or not anything was exercised.
What you get
- Plan registered with HMRC
- Annual return filed by 6 July
- Payroll treatment on vest and exercise
- National Insurance position set
- UK tax-advantaged plans assessed
- Valuations agreed with HMRC where needed
What we do
Plan registration
Each plan with UK participants registered with HMRC, which has to happen before a return can be filed at all.
The annual return
Filed by 6 July every year, including nil returns. Late filing carries automatic penalties that escalate.
Payroll treatment
Income tax and National Insurance deducted correctly at vest or exercise, and the employee reimbursement handled inside the deadline that avoids a further charge.
The recharge agreement
Where the UK company reimburses the parent for the cost of the shares, a written agreement secures a corporation tax deduction. Without it the deduction is usually lost.
UK-advantaged plans assessed
Some UK schemes carry far better treatment for the employee. Group-owned subsidiaries usually do not qualify, and the position is confirmed before anything is offered to staff.
Valuations
Agreed with HMRC where the plan needs one.
Almost every technology and growth-stage group grants equity to its people, and almost every one of them administers it from head office in the parent's country. The UK treats those awards as employment income, taxed through the UK subsidiary's payroll at the point they vest or are exercised, and requires an annual return for every plan by 6 July. Both obligations sit with the UK company, not the parent, and both are often missed because no one in the UK knows the plan exists.
What goes wrong
- No payroll deduction on vest. When restricted stock units vest for a UK employee, income tax and National Insurance are due through PAYE on the value at vesting. If the parent simply delivers shares and tells no one, the UK company has an underpayment, and there is a strict deadline for the employee to reimburse the tax before a further charge arises.
- The annual return is not filed. Every plan with UK participants must be registered with HMRC and a return filed by 6 July following the tax year, even a nil return. Late filing brings automatic penalties that escalate.
- The recharge is not documented. Where the UK company reimburses the parent for the cost of the shares, a written agreement can secure a corporation tax deduction for the UK company. Without it, the deduction is often lost.
- A UK-advantaged plan was available and no one looked. A UK company can grant options under schemes that carry substantially better tax treatment for the employee than a plain option from the parent, subject to conditions on the company's size, activity and independence. Group-owned subsidiaries usually do not qualify. The position is confirmed before anything is offered.
What we do
- Register each plan with HMRC and file the annual return by 6 July, every year, including nil returns.
- Set the payroll treatment for each award type so tax and National Insurance are deducted correctly at vest or exercise.
- Document the recharge between the UK company and the parent so the corporation tax deduction is available.
- Assess whether a UK tax-advantaged plan is open to the company, and where it is, work with your lawyers on the plan documents and agree the share valuation with HMRC.
- Give each UK employee a plain explanation of what they will be taxed on and when, because the questions come to the UK finance contact and not to the parent.
What we need from you
- The plan rules and the grant agreements for UK participants
- A list of UK participants with grant, vest and exercise dates
- Whether the UK company reimburses the parent for the cost of the shares
- The parent's share valuation basis
Common questions
Our plan is administered in the US. Is that a problem?
Only if no one tells the UK payroll. The awards are UK employment income when they vest for a UK employee, and the UK company must deduct through PAYE and file the annual return. Where the plan is administered we can work from the administrator's reports.
What is the 6 July deadline?
The annual return for employment-related securities, due by 6 July after the end of the tax year on 5 April. It applies to every plan with UK participants and a nil return is still required once a plan is registered.
Can our UK staff get the good UK options?
It depends on the company's size, its activity and whether it is independently controlled. A subsidiary of a large group usually cannot, and the position is confirmed before anything is offered to employees.
Does the UK company get a tax deduction?
Often yes, where it bears the cost of providing the shares and the recharge is documented. The deduction depends on that documentation.
Related services
Payroll, pensions and employing staff in the UK
QuotedPAYE every payday and the workplace pension
Registration, payslips, reporting to HMRC on every payday, statutory pay, the workplace pension and the annual reporting on share awards from the parent. Priced per head.
Employee benefits, expenses and P11D reporting
QuotedReporting anything given to UK staff beyond salary
Which benefits are taxable, which are exempt, payrolling where it makes sense, the annual return, and a settlement agreement with HMRC for the small items no one wants on an employee's tax record.
Recruiting the first UK employees
QuotedA first UK hire: package to signed contract
What the role should pay in the UK, what the package needs to include to be competitive, a compliant offer and contract, and the right-to-work checks and onboarding.
Get a fixed quote
Tell us where the parent company is and what the UK operation has to do.
