Income Tax (Earnings and Pensions) Act 2003 section 81B–81C

Annual returns

Sections 81B and 81C set out the annual return obligations for companies operating a Share Incentive Plan (SIP), including what must be reported, when it must be filed, and the penalties for late or incorrect returns.

• Once a SIP has been notified to HMRC, the company must file an annual return for each tax year by 6 July following that tax year, including information enabling HMRC to determine the tax and capital gains tax liabilities of participants and other relevant persons.
• If a key feature of the SIP or plan trust is altered during a tax year, the return must include a declaration confirming that the change has not caused the plan to fail to meet the qualifying requirements.
• Annual returns are no longer required after the tax year in which the SIP's termination condition is met — that is, once a plan termination notice has been issued and the trustees have completed all required steps.
• Late filing attracts an initial penalty of £100, further penalties of £300 each at three and six months, and daily penalties of £10 after nine months, though penalties may be set aside where the company can demonstrate a reasonable excuse.