| Form 42 non-compliance increases risk |
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| Written by Adrie van der Luijt | |
| Wednesday, 11 June 2008 | |
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A third of listed companies risk penalties by last-minute filing of employee securities returns.
They are running the risk of incurring late filing penalties by not submitting their Form 42 until the final week of the reporting window. In a survey of listed companies by Deloitte, including a number from the FTSE 350, the business advisory firm uncovered the alarming figures which also reveal that just 11 per cent of companies are very confident that they are accurately completing their Form 42. Internationally mobile employees Ian Stone, tax partner at Deloitte, warned that companies with internationally mobile employees would find it a particular challenge to meet their reporting obligations, given the complexities inherent in this profile of workforce. All listed 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 window from 6 April to 6 July. 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 HM Revenue & Customs (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 fact, 28 per cent of respondents 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. Increased tax risk With 25 per cent naming problems in freeing up internal resources to complete the form as a key area for concern, it is perhaps surprising that just 9 per cent completely outsource the work to external advisors while 34 per cent engage them for only certain aspects of the process. Matthew Ellis, a partner who leads Deloitte’s national employment taxes practice, warned companies to ensure that they are not placing themselves at increased risk from a wider tax perspective. “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,” he said. Ellis added that 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 increased the risk of additional liabilities arising if PAYE failures were not rectified in a timely manner. Related articles
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