Companies with a registered EMI scheme have to file an end-of-the-year return template to HMRC on or before 6 July every year. You can now generate this return template with all the necessary details directly on Ledgy.
Content
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Here's a quick demo from our engineer, Marlies:
The results:
an Ods file which you can verify and then submit to HMRC.
The EMI annual return template includes 5 tabs, Ledgy will complete the most commonly applicable: EMI40_NonTaxable_V3, EMI40_Taxable_V3 and EMI40_RLC_V3. This includes any grants that have been cancelled, settled and exercised.
How it works
1. Prep your EMI, stakeholder and company data so that they are fully up to date
EMI plans and individual grant details
Ensure that within each EMI plan, the grant type has been set to EMI type
Any exercise, cash settlement or terminations can be reflected per grant by clicking on the Three Dots to edit.
Enable values to NIC election or agreement
Grant → From plan: {select a EMI plan}
Enable values to Section 431 election and Amount subjected to PAYE
Transactions page → Find a grant from an EMI plan → Exercise this EMI grant
EMI valuations
You can enter the EMI valuation like any other company valuation event: go to Ownership > Transactions > Add Valuations and select EMI from the drop down menu.
National Insurance Number (NIN) for each EMI option holder
To store your stakeholders' NIN on Ledgy it is necessary to create a stakeholders' custom field called "NIN".
You can easily add this as a custom stakeholder detail in bulk on the Stakeholder page.
To find more information on bulk edit, please view this article. Alternatively, you can also edit individual stakeholders’ details, open the "Custom fields" section, click on "Edit fields", and create a custom field named "NIN".
Note: the custom field needs to be named exactly "NIN" so that it's correctly retrieved on the EMI Reports page
Company PAYE reference
This can be added or edited with Company Settings > General > Edit company profile
2. Select the date range
By default, this is set to the beginning and the end of the latest tax year defined by the authority.
You can change the From date depending on when your EMI scheme was created
3. Enter any disqualifying events
To create a disqualifying event:
You’ll be asked to provide more detail onthe event where applicable. This can include the date, nature, affected grant, affected stakeholder and affected share class.
If you seek more information on disqualifying events, check out the official EMI documentation here.
The full list of events:
Company came under control of another company
Company stopped meeting the trading activities requirement
Option holder stopped meeting the working time requirement
Terms of the option changed
Change in share capital
Partial share class conversion
Option holder reached maximum entitlement of EMI and CSOP
Company did not start to carry on a qualifying trade
4. Download the file for a final review
As seen in the first video, use the download button at the top right corner of the page to download the report.
5. Upload to HMRC
Once you have reviewed the data on the file, please upload the .ods template to HRMC directly on their website.
FAQs
Your EMI Annual Return report is incomplete? Please check the following list to troubleshoot.
Prerequisites
Make sure grants are EMI type
Add / sync NIN to your stakeholders
For EMI40 return
At grant level: define NIC election or agreement
At exercise level: define the amount subjected to PAYE and section 431 election
In the company settings: add your PAYE ref
On the EMI Annual Return page: add disqualifying events
What data go to which sheet?
RLC if your EMI grant has been terminated or expired and the termination date or expiry date falls into the date picker column
NonTaxable consists of EMI exercises that satisfy the following conditions:
💡 NonTaxable conditions
If the exercise price was equal to or more than the share’s AMV at the time of granting AND there was no disqualifying event
If the exercise price was equal to or more than the share’s AMV at the time of granting AND Options were exercised within 90 days after a disqualifying event
Taxable consists of EMI exercises that are the inverse of the above conditions. Meaning every valid EMI exercise that does not satisfy the above conditions goes to the taxable tab.
How are first name, second name, and last name determined?
The general rule is to take the first string of the full name as first name, and last string of the full name as last name. Everything in between will be consider as second name.
When are exercised shares defined as sold?
If a stakeholder S has X amount of EMI exercised on date Y in share class Z, and there are also X shares being transferred or decreased from stakeholder S on date Y in share class Z, this column will be YES, otherwise NO.