Rising to the challenge: UK HMRC reporting changes

Head of Business and Systems Analysis, Marco Forster, explains how Equatex has aided its clients through this demanding period
Reporting illustration

Amidst an environment of considerable change and complexity in the worlds of corporate finance, taxation and legality, the onus on businesses to ensure both clarity and compliance has never been greater.

Last year, HMRC introduced significant changes to the filing and reporting of employee share plans. The first of these changes was the introduction of self-certification of tax-advantaged schemes. “It was a massive shift,” explains Head of Business and Systems Analysis at Equatex, Marco Forster. “Schemes such as SAYE, SIP and CSOP used to be reviewed by HMRC to ensure that companies were complying with the rules. Now, however, companies themselves are responsible for self-certifying any tax-advantaged schemes which they choose to offer their employees.”

And this was only one aspect of the HMRC’s drive towards simplification of their processes. “Not only does HMRC require online registration of any plan in operation,” says Marco, “they decided to change to an online reporting process.”

Marco Forster presentingFor companies – those offering both tax-advantaged and non tax-advantaged schemes – the changes have signalled the end of paper-based methods of share plan reporting. Today, companies must register all of their share plans online and submit annual returns using this new format. Theoretically simple, companies felt the weight of the changes.

“The main problem was to understand what had to be done in order to get the right data in the reports,” says Marco. “Imagine a big glass full of jellybeans: you have red ones and yellow ones. Now you have to report the number of jellybeans that taste like strawberry. You can assume that these are the red ones and report them in a certain way. But it is not quite clear that your assumption that red equals strawberry is correct.” It is a simple analogy for a complex challenge which Equatex had to face, and is still facing to an extent.

Marco, who has been working in the business for 15 years, knows what it means to roll out new functionality within companies: “There are always many questions and there is room for misunderstandings. Everybody comes with a different case. It’s a demanding project.”

Share plan reporting is often considered a simple case of button pushing, meaning that the crucial background processes and complex correlations can be overlooked. “What does a certain number signify on a report? To which period does it relate? What’s to be considered for this number, and what’s not? All of these details make reporting share plans actually extremely tricky,” says Marco. “Consider a large corporation with 20 different plans. First, all of those have to be registered. Or will you group some together because they are the same plan types? Then, a report is run and stored on the file system. Another two will then be done. Before the company knows it, it has 20 files, and it needs to be ensured that the file names not only reflect which plans they concern but also which periods, which tax years and what times. These details, irrelevant to the actual reporting itself, are extremely important to the process of reviewing data, re-running data and fixing problems.”

Share plan reporting is often considered a simple case of button pushing, meaning that the crucial background processes and complex correlations can be overlooked.

As a provider of solutions for such scenarios, Equatex has been committed to building its expertise around the requirements and their nuances in order to support its clients through the new process. “There was no way we could test our approaches internally so we had to collaborate with clients,” says Marco. “We were physically going to them and checking uploads with them in front of their computers.”

Marco Forster

Marco Forster

The project has been challenging, but Equatex has quickly risen to it. A lack of initial guidance from HMRC meant that the company had to become more flexible for its clients as requirements have changed. Going forward, Equatex will be acting on a backlog of suggestions and improvements following the first submissions from companies earlier this year, particularly in the aftermath of the 2015 ifs ProShare Conference at which Marco presented.

“There were a lot of companies giving feedback that some of the HMRC reporting doesn’t make sense, that certain aspects aren’t clear and that more guidance is required,” says Marco. “The process can clearly survive as it stands, but there is room to make it better. There always is.”

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Communication team at Equatex AG
Equatex provides international employee and executive compensation plan services for today’s global enterprise, supporting clients with participants across Europe, Asia, Australia and America.

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