What does section 486 of the Income Tax (Earnings and Pensions) Act 2003 require?

Section 486 requires companies that grant unapproved share options to employees or directors to notify HMRC of the relevant particulars. This reporting obligation covers both the grant and exercise of share options that fall outside tax-approved schemes such as EMI, CSOP, or SAYE arrangements.

What is the deadline for notifying HMRC about share options under section 486?

The company must submit the required notification to HMRC by 6 July following the end of the tax year in which the share options were granted or exercised. For example, options granted or exercised during the 2024–25 tax year must be reported by 6 July 2025.

What information must be included in the HMRC share option notification?

The notification must include such particulars as HMRC requires, typically the identity of option holders, number and class of shares under option, dates options were granted or exercised, the option price, and the market value of shares at the date of exercise. This is reported directly to HMRC.

Why is the section 486 share option reporting obligation important?

Share options can give rise to income tax charges when exercised, so the reporting obligation ensures HMRC has visibility of these arrangements. Companies must maintain appropriate records throughout the year and submit notifications on time, as failure to comply could result in penalties.

Income Tax (Earnings and Pensions) Act 2003 section 486

Duty to notify matters relating to share options

Section 486 requires companies to report certain information to HMRC when share options are granted to employees or directors, setting out what must be reported and when.

Companies granting share options must notify HMRC of relevant details by 6 July following the end of the tax year in which the options were granted or exercised.
The notification must include particulars of the share options as prescribed by HMRC.
This reporting obligation applies to share options that do not fall within an approved share option scheme (such as Enterprise Management Incentives, Company Share Option Plans, or Save As You Earn schemes).
The requirement ensures HMRC can monitor the tax implications of share option arrangements and assess any resulting income tax liabilities on the option holders.

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