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SW COMPANIES RUNNING RISK OF FORM 42 NON-COMPLIANCE, WARNS DELOITTE

Businesses across the South West risk incurring fines from HM Revenue & Customs (HMRC) by failing to meet a 6th July deadline for the completion of their employment related securities return, or Form 42, according to a Bristol-based expert.

Many risk having to pay late filing penalties by not submitting their Form 42 until next week - the final week of the reporting window.

Companies which grant share options or make share awards to directors or employees under unapproved schemes are obliged to complete an annual return during a three-month period from 6th April to 6th July.

In a national survey of listed companies, including a number from the FTSE 350, Deloitte found the just 11 per cent of companies are “very confident” that they are accurately completing their Form 42.

Ian Stone, tax partner at Deloitte in Bristol, said: “The challenge to South West businesses is a very real one and the reporting requirements are more far reaching than many people may think.

“Whilst our survey did not include UK subsidiaries of overseas quoted parents or UK private companies, these companies find it particularly challenging to comply with the requirements of Form 42.

“Companies with internationally mobile employees will also find it a particular challenge to meet their reporting obligations, given the complexities inherent in this type of workforce.

“The point to emphasise is that just because you do not operate a formal unapproved employee share scheme does not mean you do not have a reporting obligation – other transactions can fall into the reporting net. The difficulty appears to lie not in the understanding of what is required, but rather how to complete the form in an accurate manner.

“As a result, many are leaving it to the last minute and risk having penalties imposed by HMRC. With a penalty regime of up to £300 for each reportable event, the cost for companies who do not meet their obligations could easily escalate.”

In the Deloitte survey, 28 per cent of listed companies highlighted understanding which section of the form to disclose particular types of awards, as the main area of difficulty and called for greater clarity in the accompanying guidance notes. And with 25 per cent naming problems in freeing up internal resources to complete the form as a key area for concern, 9 per cent resort to outsourcing the task to external advisers while 34 per cent use them for part of the process.

Ian Stone also wanted companies to ensure they are not putting themselves at increased risk from a wider tax perspective.

He commented: “Given HMRC‘s new risk-based approach, whereby Form 42 is one of the tools used to measure the level of tax risk in a business, companies should not underestimate the time it takes to comply with their Form 42 obligations and the importance of getting it right.

“The delay by companies, through either not collating data on an ongoing basis or not completing the form until the end of the reporting window, also increases the risk of additional liabilities arising if PAYE failures are not rectified in a timely manner.”

ENDS             26th June 2008

For further information please contact Neil Fraser, Sturgess Van Damme, on 01275 349011 or email neil@sturgessvandamme.co.uk