Philip Fisher explains the causes and implications of the delay in the filing deadline for submitting annual reports for employee share schemes.
Who needs hackers?
We have heard a lot about disruption caused by sinister hackers to government and corporate websites in recent months. Sadly, HMRC does not seem to need outside assistance when it comes to immobilising their online systems, in particular, the underpowered Employment-Related Securities (ERS) service, which is used to make the annual reports required for employee share schemes.
History
When the online ERS system was launched in 2015 there was a fundamental process breakdown. HMRC was effectively obliged to abandon the statutory 6 July deadline and waive all penalties. Most tax practitioners were willing to laugh that off as first-year nerves.
There were fewer problems with ERS in 2016, but the news announced on 23 June 2017 that the filing deadline of 6 July 2017 for the 2016/17 share scheme returns had been deferred until 24 August 2017 stretches the system’s credibility once again.
Online vision
In principle, the idea of filing all share scheme data online is unexceptionable. Paper returns were always a pain and tended to get lost somewhere between the tax agents’ desks and those of the relevant HMRC inspectors.
However, speaking as someone who was involved in the consultation process that assisted in setting up the new plans, while those involved at HMRC were dedicated and committed, the resources and underlying IT capabilities were far more limited than most would have regarded as ideal. In addition, the determination to launch on time meant that some corners were potentially going to be cut.
Ever since, the proof of this pudding seems to be in the starvation. In two years out of three, with a satisfying but as it seems in retrospect misleading blip in the middle, it has not been possible to partake on the date when we were all ordered to sit down at the ERS table.
No reason why
HMRC has been reticent to reveal reasons behind their decision to put back the deadline and the initial late filing penalty. Their Employment-Related Securities Bulletin No 24 says nothing more than the bland “We’re aware that the ERS annual returns online service has experienced some issues. We’re sorry this has prevented some returns from being submitted.”
Those at the sharp end have been expecting some sort of a concession with regard to the penalty regime following a four-week filing famine throughout May when the ERS online service failed quite spectacularly. Rather than access to the system, employers and/or their agents were met with the informative but far from helpful message “page not found” when anyone tried to upload the annual return templates.
From the point of view of both the taxpayer and their advisers, the extra weeks to finalise and submit share scheme returns will be welcome, although given that this is the peak holiday period, it may not be as much help as they would like.
Penalties
One major point to note is that while the initial deadline has gone back over six weeks and the attached late filing penalty (£100) ignored, the deadlines for additional delays remain attached to 6 July 2017.
This means somewhat confusingly that the annual returns which are due on 24 August will be deemed to be three months late (additional £300) on 7 October, six months late (additional £300) on 7 January 2018, and nine months late (potential further £10 per day) on 7 April 2018.
Bearing in mind the resources that are available to HMRC and the massive tax gap that we must assume is ever-increasing, although it is hard to obtain definitive statistics, most readers are likely to conclude that this is not good enough.
Boot on the other foot?
If taxpayers fail to supply information on a timely basis, they are penalised harshly. On the other hand, when HMRC commits far greater misdemeanours, it merely issues weasel words and defers the deadline and commencement of penalties by a few weeks. Perhaps next year, any taxpayer that fails to comply with a tax return deadline could be penalised by having the due date for the following year brought forward by six weeks?
That may be too much to ask but it would be nice to feel confident that come May, June and early July 2018, and in each ensuing year, HMRC’s Employment-Related Securities online service might be fully functional. Even better, the whole system could do with a 21st-century makeover so that it becomes truly interactive and never falls over.
