Companies with a registered EMI scheme have to file an annual return with HMRC by July 6th following the end of the tax year. This filing reports activity (grants, exercises, settlements, terminations, expirations) related to EMI grants during the tax year. You can generate your return in seconds with Ledgy.
Please note:
Ledgy populates 3 of the 5 tabs in HMRC's template: EMI40_NonTaxable_V4, EMI40_Taxable_V4 and EMI40_RLC_V4 (the other tabs will be included in the exported file but not contain any data).
Ledgy does not automatically create disqualifying events, so you'll need to add them on the "Disqualifying events" page.
Unpublished transactions are included in the return, so make sure there are no draft transactions you don't intend to report.
Stock splits are ignored when calculating valuations and quantities, so if you have a stock split your return may require manual adjustments.
You must ensure Ledgy data is up-to-date in order to generate an accurate return.
Monetary values should be reported in GBP. If your company's base currency is not in GBP, you should set the currency of the relevant transactions to GBP.
Ledgy makes assumptions for certain columns that may need manual adjustment. See column guidance for more details.
Ledgy's
.odsexport is designed to match the HMRC template exactly, so please do not change the format. Returns that do not match HMRC's template will be rejected.Returns cannot be retrieved once submitted to HMRC, so we recommend saving your final submission in a secure location, such as Ledgy's data room.
For more info, please see the official guidance from HMRC.
Table of contents
Here's a quick demo from our engineer, Marlies:
How it works
1. Use the EMI grant type on Ledgy
This return only includes transactions related to EMI grants. This grant type is defined on the plan level, so grants must come from a plan with the type EMI.
2. Prepare your valuation, transaction, stakeholder, and company data
The return is populated with information from your transaction history, so this must be comprehensive and accurate. You need to add the following:
Grants (type:
EMI) with strike price in GBPExercise, cash settlement, and termination transactions for any grants where these events have taken place
Valuations (type:
EMI (UK)) on or before the grant date with: AMV, UMV, expiry date, and HMRC reference (if agreed with HMRC)Stakeholder custom field named "NIN" to populate national insurance numbers
PAYE reference in Company Settings > Company Profile.
Additionally, there are HMRC reporting fields on exercise and cash settlement transactions that can be actioned to fully populate the return. You can fill these out each time you add a transaction so the work is already done when it comes to preparing your return. Alternatively, you can fill these out manually in the exported spreadsheet:
Section 431 election
NIC election
PAYE operated
Amount subjected to PAYE
3. Add any disqualifying events
Disqualifying events are events that cause an EMI option to lose its tax benefits. The "nature" of disqualifying events is a list defined by HMRC. Ledgy does not automatically create disqualifying events, so you'll need to add them by navigating the "Disqualifying events" page in the top right. You’ll be asked to provide more detail on the event where applicable. This can include the date, nature, affected grant, affected stakeholder and affected share class. For more information on disqualifying events, check out the official EMI documentation here.
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. Select the appropriate tax year
Now you're ready to generate your return. Navigate to Reports > Compliance > EMI annual return to view your return. Select the desired tax year to filter for events dated within that date range. FYI: the UK tax year runs from April 6th to April 5th.
5. Preview the report values
You can see the values Ledgy has calculated for each column in-app. Check if any data is missing (see troubleshooting). You may see warnings at the top of the page regarding missing data.
5. Download the return for final review
If you're happy with what you see in-app, you can download the return using the button in the top right of the page. Ledgy exports your return in the exact format of the HMRC template, so it can be submitted right away. However, you should review and populate any columns that Ledgy is unable to answer. See column guidance for more details.
6. Submit to HMRC
Returns are submitted on the HMRC website here. HMRC offers a checking service to catch any formatting errors. You can upload your submitted returns to Ledgy's data room for safe keeping.
Column guidance
Below are notes on Ledgy's support for specific questions/columns in the return:
Result of a disqualifying event - Based on whether the event is tied to a disqualifying event that you've added to Ledgy.
Listed on exchange - Ledgy assumes you are a private company and always answers NO.
HMRC agreed market value - If you add an HMRC reference to the relevant CSOP valuation this column will be YES, otherwise NO.
Section 431 election - If you've made such an election to disregard restrictions, this can be flagged on the exercise transaction.
All shares 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.
Troubleshooting
If you're not seeing the expected data in the report, please check the following:
The relevant plan and grants are using the EMI grant type.
You've added valuations of the type
EMI (UK)on or before each grant date (and the valuations are not expired).Make sure you've created a stakeholder custom field named "NIN" to populate stakeholder national insurance numbers.
If PAYE reference is missing, add it in Company Settings > Company Profile.
FAQ
Which data goes into each sheet?
EMI40_Adjustments_V4 - Ledgy does not populate this sheet (it relates to option price adjustments following variations in share capital).
EMI40_Replaced_V4 - Ledgy does not populate this sheet (it relates to options replaced due to company reorganisation).
EMI40_RLC_V4 - Cash settlement, termination, or expiry transactions from EMI grants. Only cash settlement transactions have monetary value in Ledgy.
EMI40_NonTaxable_V4 - Exercise transactions that qualify for tax benefits, satisfying the following conditions:
The exercise price was greater than or equal to the share’s AMV at the time of granting AND there was no disqualifying event.
The exercise price was greater than or equal to the share’s AMV at the time of granting AND Options were exercised within 90 days after a disqualifying event.
EMI40_Taxable_V4 - Exercise transactions that do not satisfy the above conditions.
How are first name, second name, and last name determined?
You enter Full name for stakeholders on Ledgy. For the annual return, we take the first string of the full name as first name, and the last string of the full name as last name. Everything in between will be considered a second name.