|Form42@efaze.com has been provided to assist small and
medium sized businesses cope with the implications of the new "form 42"
which has recently been implemented by HMRC. This area of our site is
focused towards the small, owner managed limited company. More
technical discussions of the many other aspects of this form and its
implications are welcomed if you care to contact us.
Revenue have clarified their position on the requirement to report share
options and transfers on Form 42 returns. Failure to return the
notifiable event on Form 42 to the Inland Revenue by 6 July 2004 may
result in a £300 fine per reportable event.
Please note, those companies that haven't received Form 42 will be
granted an extension to file of two months. The date for filing will
therefore be 30 November 2004.
Reportable events per section 421k ITEPA 2003 are:-
- an acquisition of securities, an interest in securities, or a
- an event which is a chargeable event in relation to restricted
- an event which is a chargeable event in relation to convertible
- artificial enhancement of market value of securities
- disposal of securities and interests in securities that were
acquired for less than market value
- securities and interests in securities disposed of for more than
- charge on benefit from securities or interest in securities
- the assignment or release of a securities option acquired
pursuant to a right or opportunity available by reason of the
employment of the person who acquire the securities
- the receipt of a benefit in money or money's worth which is
received in connection with such a securities option.
The Inland Revenue have answered the following questions regarding
their interpretation of section 421k ITEPA 2003:-
Does Form 42 have to be submitted on incorporation of a
company in respect of the subscriber shareholders?
If this is the company formation agent then that is not a reportable
event. If this refers to the prospective directors then this is likely
to be a reportable event.
Often companies are bought "off the shelf". Where this is the
case and the purchasers take over the shares of the formation agents, is
the transfer from agent to the purchaser a reportable event?
Yes, the transfer is likely to be in relation to prospective
employment. It is also important to remember that in these circumstances
although company registration agents are strictly exempted from the duty
to report the acquisition by the agent's own nominee subscribers, the
transfer or re-allocation of those shares to any client is a reportable
event. The responsibility for filing the form is the employers in the
first instance, the person from whom the shares were acquired and
ultimately the acquiring person.
What about the situation where an existing director/employee
transfers shares to another director/employee or prospective
director/employee? Is this reportable on Form 42?
Does the form have to be completed where shares are issued to
someone who is not an employee/director at the time of the issue but
becomes one at a future date? What is the date by which such a
reportable event need be submitted on Form 42?
This may be a reportable event but it will depend on whether the
shares are employment related securities made available by reason of
employment or prospective employment. The company will know why it is
issuing shares to someone who is not an employee/director and the
likelihood is that it relates to prospective employment and reportable
events. Reportable events must be notified to the Revenue - by 6 July if
you have been sent Form 42 or 30 November if you have not received Form
42 - in the tax year following that in which the reportable event takes
The Inland Revenue interpretation of the legislation indicates they
regard any share transfer between 6 April 2003 to 5 April 2004 by
Directors/Employees in a company as being notifiable on Form 42. The
form can be downloaded from
One of my clients has set up a company with his wife. They
are both directors of the company and have issued themselves shares and
intend to remunerate themselves using dividends. There is no "share
scheme" here. I understand there is a form that I may need to complete.
Yes. Form 42 issued by the Inland Revenue needs to be completed in
relation to employment related securities. As they are officers of the
company and have shares issued in that capacity, even where there is no
amount chargeable to income tax, under the new rules the issue must be
reported on form 42. In addition, if the wife later gives or sells
further shares to her husband, because he has acquired more shares "by
reason of his employment" this too is reportable. Of course whether or
not it was by reason of his employment is another matter for debate.
This will also hit large companies. A public share issue to which
employees may just happen to subscribe will present a reporting headache
for the employer - they may not even know that employees bought shares.
What is a reportable event?
A reportable event for 2003/04 occurs where an individual has
acquired shares by reason of a current, former or prospective employment
or directorship in the period 6 April 2003 to 5 April 2004. Even where a
company is bought off the shelf and the purchasers take over the
subscriber shares from formation agents, the Revenue’s view is that the
transfer is likely to be by reason of prospective employment and must be
Do I need to use Form 42?
The Inland Revenue have indicated a letter or spreadsheet detailing
the information required by Form 42 including share transfers will be
or a Form 42
Where can I get help with form 42
Inland revenue FAQ site
Form 42 link
Form 42 deadline extension information
Share scheme site