Employment-related securities - Reporting Requirements and Form 42

The Chancellor of Exchequer announced on the 28 November revision of the rules on reporting of employment-related securities so that some events no longer need to be reported. Following the end of consultation on Form 42 and the reporting process for employment related shares and securities, HMRC have published a Full Regulatory Impact Assessment and a Consultation summary.

The Consultation summary outlines HMRC responses to the comments and suggestions made by the respondents to the consultation. Below we provide more details of the proposed changes.

Redesign of Form 42 (PDF 126K)

As a result of the consultation we have revised the reporting requirement for a number of frequently occurring events, and this has resulted in changes to the form itself.

The events that no longer need to be reported from the 6 April 2005 are:

  • the acquisition of most founder shares
  • the acquisition by directors of further shares through a rights or capitalisation issue where the further shares would be available to all shareholders on the same terms
  • shares acquired by directors under reinvestment of dividends arrangements (SCRIP or DRIP)
  • residents’ acquisition of shares in flat management companies.

As well as removing a number of reportable events we have also simplified and shortened the form with improved layout to enable easier completion.

  • We no longer require details of individual grants of options. This has been replaced with a requirement to provide summary details only.
  • There is now only one section (previously four) to provide details of the acquisition of securities.
  • The requirement to provide a market value of the security has been removed from this and a number of other sections.
  • We have simplified the form by removing example entries and instead provided examples and more details in the Form 42 Guidance.
  • Old section 3.i. has been removed and reporting requirements incorporated within the individual sections.
  • Old section 5 has been removed and newly incorporated companies that still have a reporting requirement will need to complete section 2.
  • Final page of the form now provides space for additional information that may need to be provided.

Revised and updated Form 42 Guidance (PDF 681K)

The Form 42 Guidance has been revised and updated to provide a list of events where reports are not required. Following the redesign of the Form 42, we have included in the guidance worked examples on how to complete various sections of the Form.

Founder shares

We have reviewed the reporting requirement for shares acquired by employees on incorporation or ‘founder shares’. Provided that certain conditions are satisfied when the company formation agent transfers these shares to directors of the acquiring company, no report on Form 42 is required (PDF 681K).

Form 42 on Employers CD-Rom

We intend to provide Form 42 on the Employer’s CD-Rom in April 2006. It will be an interactive Form and Guidance to enable easier completion of only the sections that are relevant. We are currently running tests on the system and will release further information as soon as it becomes available.

Form 42 online filing

In the longer term we aim to introduce an on-line Form 42 filing facility for April 2007 and we will provide further information as soon as this becomes available.