Small firms win Form 42 extension

Link: Small firms not doing enough to support clients

After months of lobbying by the major bodies, the Revenue announced last week that it had ‘decided to allow a further extension’ of the deadline for submitting so-called Form 42.

Just last month the Revenue announced an initial extension of the deadline from 6 July to 6 September. Firms who missed the deadline would be subject to a one-off penalty of £300 and potential daily charges of £60.

But in what some experts saw as evidence of the Revenue’s ‘left hand not talking to the right’ the department has again extended the deadline and introduced a far simpler one-page form for shares issued on a new company incorporation.

Mark Lee, chairman of the ICAEW’s tax faculty, said one remaining ‘bug bear’ is that ‘almost all shares acquired on incorporation need to be notified’. The Share Schemes Unit of the Inland Revenue, he said, had gone ‘over the top’ when drawing up the new requirements.

But he welcomed the introduction of a simpler form. ‘At least it is just a one page form rather than the previous 16 pages,’ said Lee. ‘That in itself is very welcome.’ He went on to say that the climb-down by the Revenue highlights the benefits of ‘collaborative working’.

The so-called Form 42, introduced in the 2003 Finance Act, was designed to clamp down on tax avoidance through unapproved employee share schemes. But huge amounts of confusion surrounded what exactly needed to be reported.

‘Many advisers who do not specialise in employee share schemes would be forgiven for not noticing that the new rules introduced new disclosure requirements for employee-related share transactions,’ said the ICAEW.

In a letter to the Revenue’s deputy chairman Dave Hartnett, Lee said: ‘I am writing to express our concern at the way the reporting regime…is being implemented; particularly for those cases where there is no share scheme but merely shares issued or transferred in connection with a newly incorporated company.’

‘Our members face uncertainty and the prospect of a very time consuming form-filling task, to be completed at short notice. Many small practices will have several hundred small corporate clients and will need to review their files carefully.’

The deadline extensions only apply to those companies that did not receive a Form 42 in April.

For full details and to download relevant forms, see:

Related reading

New Logo Saffery Champness