The following information has been adapted from Inland Revenue advice. We strongly recommend you seek the advice of your Accountant, Professional Advisor or the Inland Revenue if you have any further questions.
I have purchased a ready made shelf company from a company formation agent. do I have to complete form 42 to give details of the transfer/allocation of the subscriber shares?
The requirement in section 421J(3) ITEPA 2003 is that the responsible person must notify the Inland Revenue of any reportable events before 7th July in the tax year following that in which the reportable events take place. The form 42 is the form specified by the legislation for this purpose.
When those initial subscriber shares are transferred to the directors/employees the Inland Revenue consider that they are employment-related securities and are reportable (they are transferred either because of employment or prospective employment). Any further issue/award of shares will also be reportable events. In this situation there may be two responsible persons (i) the company formation agent who transfers the shares and (ii) the company.
As SFS send out blank share transfer forms when transferring the ownership of a company we do not hold the information required to complete Form 42 on your behalf. You will therefore need to complete Form 42 yourself.
YOU MUST STILL FILE THE FORM 42 FOR YOUR COMPANY AS WE DO NOT RETAIN DETAILS OF YOUR SHAREHOLDERS AND ANY FUTURE CHANGES.
I have incorporated a company in the last tax year ending 5 April and sent the completed CT41G to my own Inspector. Do I need to complete form 42 as well?
Yes, the form CT41G does not ask for details of share awards/allocations to directors and employees and you will have to provide these details.
The Inland Revenue recognise, however, that a company on incorporation may advise the Inspector dealing with the company’s accounts of the renouncement and transfer of the subscriber shares and the share allocation to directors and employees. This notification may be by completing the appropriate page of form 42 (for straightforward awards this would usually be page 7 section 2a). If the notification is made by letter, then provided the details of the allocation are clear and the notification is made before 7th July in the tax year following the date of incorporation, then there is no need for the company to complete a form 42 as the IR will accept that the company has fulfilled the statutory requirement of providing details of the reportable event in the prescribed form.
In any other case, or where on incorporation the Inspector has not been notified of the share allocation, form 42 will have to be completed and returned to the Share Schemes Unit. If the company does not make a report within the time given then penalties may be incurred.
Do I need to complete form 42 or can I just write to you with the details?
Form 42 is the form prescribed for providing details of reportable events. You may use your own form, spreadsheet or letter provided you give the same details as required by form 42. There is also an abbreviated form that can be used for simple submissions.
I am an agent acting for a company. Can I give you details of reportable events instead of the company completing form 42?
The company as one of the responsible persons should make the report and complete the declaration. Where the company has delegated to you the responsibility to make a report then you can make the report on behalf of the company.
SFS do not provide a Form 42 completion service.
I have not received a form 42. Do we need to make a report?
The Inland Revenue is not required to send you a form. The obligation is on you to provide the information in the form prescribed. Therefore if there are reportable events you must make a report before 7th July following the tax year end even if you have not been issued with form 42.
We have increased the share capital of the company and have issued shares to existing shareholders, some of whom are directors or employees. Is this reportable?
You must report details of shares issued to directors and employees as these have been acquired by reason of their employment with the company. Shares issued to shareholders who are not directors or employees and are unlikely to become employees are not reportable.
Do I have to make a report if I don’t sell my shares but transfer them?
Yes, the reporting requirement is concerned with whether employment-related securities have been acquired by a person and not with the form in which that person acquired them.
My company used an employee benefit trust to buy some shares from a shareholder and then sold those shares to employees. Do I have to report this on form 42?
I have gifted some shares in my company to my wife who is an employee. Is this reportable?
If you gave the shares to your wife because of her employment with the company then this is a reportable event. If, however, the shares were given to her in a personal capacity, unconnected with her employment, then it is not a reportable event. Where the transfer is unconnected with the employment there will, of course, be no deduction for the value of the shares in the corporation tax computation of the company.
I want to pass my company to my children and I have transferred some shares to them. Is this reportable?
If the shares are transferred for purely family reasons and not as a form of reward to the children as employees the transfer is not reportable.
Do I have to report grants of options under approved schemes on form 42?
No, details of grants of options under approved schemes are to be shown on form 34 (SAYE schemes) and form 35 (Company share option plans).
I have been granted Enterprise Management Incentive (EMI) options. Do I have to report them on form 42?
If the market value of the EMI options is more than £100,000 you must show the amount of options granted in excess of £100,000 on form 42. EMI options granted with a market value of £100,000 or less are shown on form 40.
I have exercised my EMI options and acquired shares. Do I have to show these shares on form 42?
You only have to show details on form 42 of shares acquired by exercising the options if market value of those shares when the option was granted exceeded £100,000. Shares acquired by exercising the options that had a market value of £100,000 or less when the option was granted are reported on form 40.
My company has granted options to directors and employees who work overseas. Do I have to report these details on form 42?
You need to report details of options granted to all employees whose UK tax residence status at the date of grant is either:
Resident and ordinarily resident (R/OR)
Resident but not ordinarily resident (R/NOR)
Not resident with UK duties (NR-(UK duties))
In addition, where options are granted to employees who are not resident and have no UK duties at the date of grant and the grant is not made in respect of any UK duties, you will still need to report these option grants if there is a reasonable belief at the date of grant that the employee will come to the UK in the near future (the company will have to make a judgment about how likely it is that the employee will come to the UK).
You do not have to report grants to employees who are NR/NOR in the UK and do not have any UK duties and are unlikely to come to the UK.
There are no reportable events for my company, do I still need to complete Form 42?
Companies who do not believe a reportable event has occurred, may nevertheless wish to file a signed Form 42. You can do this by completing the Abbreviated Form and stating on this form "you do not believe there are any reportable events but that the Form is being submitted as a protective measure".
If filing the Full Form 42 then tick the box on page 16 which confirms that there have been no reportable events during the year, together with a covering letter stating that "you do not believe there are any reportable events but that the Form is being submitted as a protective measure".
Where can I obtain Form 42 and where do I send it?
A full version of Form 42 can be downloaded by clicking here
Completed forms must be sent to -
Employee shares and Securities Unit
1 Parliament Street
For advice from the Inland Revenue Telephone - 020 7147 2819 or 2843
Where can I get some more help?
The Inland Revenue can be contacted using the following details.
Website - www.hmrc.gov.uk
Telephone - 020 7147 2819 or 2843
Return to "What is Form 42" page