share form deadline looming

[peterjhale]

Small limited companies are being reminding they have only a month left to fill in and return the new 'form 42' tax return or risk being fined.

PKF, a leading accountancy firm, advises that Form 42 should be completed and returned to the Inland Revenue before 7 July 2004 or fines of up to £300 per employee will be triggered.

From this year, employers of companies which have incorporated since April 2003 will have to arrange for submission of a new return where, 'by reason of their employment', any of the company’s employees (including directors) obtain or hold any right or interest in relation to shares or securities - other than via Government approved share schemes.

Small limited companies are being reminding they have only a month left to fill in and return the new 'form 42' tax return or risk being fined.

PKF, a leading accountancy firm, advises that Form 42 should be completed and returned to the Inland Revenue before 7 July 2004 or fines of up to £300 per employee will be triggered.

From this year, employers of companies which have incorporated since April 2003 will have to arrange for submission of a new return where, 'by reason of their employment', any of the company’s employees (including directors) obtain or hold any right or interest in relation to shares or securities - other than via Government approved share schemes.

This includes securities that have been made available to employees by an employer or a person connected with an employer.

The new return is likely to affect even the smallest companies, as when a business is incorporated (to form a limited company) it must issue shares. These are usually issued to the owner and his or her spouse who become directors of the company. Failure to report such a share issue on a form 42 would trigger a penalty of £600.

Mike Evans, director of remuneration and benefits at PKF, says: "The biggest impact of this new red tape will be on the smallest firms. The Inland Revenue's view is that any shares that a company issues to employees or directors must be 'by reason of their employment'.

“So it is expecting the thousands of businesses that have incorporated between 16 April 2003 and 5 April 2004 to report issues of shares to their tax office.”

Fines will be given for every ‘reportable event’ not included in the returns, but Evans warns that this could cause confusion and urges businesses not to get caught out.

"Many companies may be caught out because a 'reportable event' is very widely defined - including everything from the issue of shares or options to corporate reorganisations that affect the value of share options already granted to employees.

“If you have a number of employees and there have been a series of transactions or other events the potential penalty could easily become huge.

"This new red tape burden comes on top of the new tax on dividends paid by small companies to their owners, further eroding the benefit of operating through a limited company. We can only hope that budding entrepreneurs don't allow red tape hassles blind them to the real advantages of running their own company".