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Any company offering UK-based employees any form of rights in the company's stock should be aware that these employees may have reporting obligations to the UK tax authorities. A UK resident employee receiving taxation of stock options in the uk dubai securities will likely face UK taxation consequences. It also covers rights under UK-specific share scheme types, such as enterprise management incentives or company share ownership plans.
This can have various implications for the employing company. If the stock is listed, if stock is acquired or option exercised immediately prior to an exit, or if the stock is under the control of another company, then the employer may have withholding obligations in respect of the UK tax and social security contributions charge.
Any company that has outstanding employment-related securities held by UK employees is obliged to complete an annual return called a Form A Form 42 must be completed for each tax year commencing on April 6 each year and received by HMRC by the July 6 following the tax year.
Form 42 captures a range of information, not simply granting employment-related securities but also the exercise of options, certain types of vesting and the lifting or alteration of restrictions attaching to stock awards. The purpose of the form is to capture any event during the course of a year that may have given rise to a UK income tax charge in relation to employment-related securities. Even where no events have occurred, if employment-related securities remain outstanding it may be necessary to submit a nil return.
Submitting returns is a legal obligation and there are penalty charges for a person who is obliged to submit a Form 42 and does not do so. Generally when HMRC becomes aware that employment-related securities are at issue, a blank form will be issued for completion. Even if you are not asked to complete a Form 42, you may still have a legal obligation to do so. That does not mean that there is not an obligation.
Form 42 is HMRC's all-purpose return for reporting in relation to employment-related securities. The UK also operates some specific tax advantaged employee share schemes: These have their own reporting requirements, the EMI40 and Form 35 respectively.
These are to record specific details of options granted and exercised taxation of stock options in the uk dubai a course of a year. Completing a Form 42 taxation of stock options in the uk dubai be a complex business. The form seeks to capture a broad variety of information. Its design assumes a familiarity with HMRC jargon, which does not always equate in a direct way with the language typical of US share plans.
Professional counsel may be useful in such circumstances. We have extensive experience in advising US clients on the UK implications of their employee equity incentive arrangements and in completing these forms. For more information on Form 42 and other UK reporting obligations around equity compensation plans, please contact:.