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Form 42: Employment-related securities schemes

The following information is required to report employment related securities and options transactions under Regulation S-T (Regulation S-T). This form must be filed with the SEC within 30 days of the transaction date.

This form must be filed electronically via EDGAR. You must file it electronically because you are submitting it directly to the SEC. If you do not use EDGAR, you must send paper copies to the Office of Compliance Inspections and Examinations, Attention: Director of Operations, One Bowling Green Plaza, Suite 3200, Bowling Green, KY 41102-4311.

You must complete this form even if you did not receive any money or property from the sale of the security or option.

If you sell securities or purchase options, you must include the name of each person acquiring the securities or purchasing the options, including yourself. For example, if you sold 10 shares of XYZ common stock and received $10,000 cash, you must report the names of the persons receiving the securities or paying the cash.

You must identify the type of securities or options being sold or purchased. In addition, you must provide the number of shares or units involved and the price per share or unit.

Include the amount paid for the securities or option.

For each security or option sold, state whether you received payment in cash or property.

By reason of employment

– What does it mean?

The IRS defines “by reason of employment” as including any type of compensation paid to you because of your employment relationship with the employer. For example, if you receive a salary plus an annual bonus based on performance, the amount of the bonus must be included in gross income. If you receive a lump sum payment such as a severance pay, the entire payment must be included in gross earnings. In addition, you cannot exclude from gross income amounts received under certain types of plans, such as deferred compensation plans.

For 2018 tax purposes, there are three exceptions to the definition of “by reason of employment.” First, payments for medical care are excluded if the treatment is related to your work injury. Second, payments for education expenses are excluded if the education qualifies as a qualified tuition program. Third, payments for moving expenses are excluded if the expense is incurred while relocating to take a position with your current employer.

Employment-related securities and securities options

man and woman sitting on table

A person who holds securities may sell them to another person. This transaction is called a sale. A person who buys securities may buy them from someone else. This transaction is called buying. If you are selling some of your securities, you must pay tax on the gain. You may use capital gains tax to reduce your income tax liability.

If you hold securities options, you may exercise those options to buy or sell the underlying security. An option gives you the right to buy or sell a particular type of security at a certain price within a specified period. For example, an option to buy $100 worth of a stock might give you the right to buy $100 worth, at a fixed price, on a specific day.

You may have different types of securities depending on whether the issuer is publicly traded or privately held. Publicly traded companies issue securities such as common shares. Private companies issue securities like preferred shares.

An employer may offer you securities as part of your employment package. These include shares in a company, shares in an employee pension plan, and options to buy securities.

The securities laws apply to employers offering securities to employees. They cover issues such as how much information you must provide about the securities being offered, what restrictions there may be on the transfer of the securities, and how long you must keep records of transactions involving securities.


Some people trade securities directly with each other. Others do it through exchanges. Most large firms operate their own exchange where they list securities for trading. Other exchanges are operated by banks, brokerages and mutual fund companies.

Cash and Account balances

The taxman wants to know how much cash and bank accounts you hold. If you don’t provide the information, HM Revenue & Customs might come knocking.

HMRC says it needs the data to help track down people who haven’t paid their taxes. But there’s no obligation to submit the information. And even if you do, you won’t necessarily get anything out of it.

Securities no longer tied to employment – 7 Year Rule

The SEC recently published rules regarding securities that cease to be employment related. If you are considering selling stock options, 401(k), restricted stock units, or another type of security that ceases to be employment related, it is important to understand how long you must wait before you can sell those securities.

Under the “7 Year Rule,” you cannot sell such securities within seven years after you leave employment unless one of three exceptions apply. These exceptions include:

1. You sold the securities because you had no reasonable alternative;

2. You received payment for the sale of the securities; or

3. Your employer required you to retain ownership of the securities.

If none of these exceptions apply, you cannot sell the securities until seven years after you leave the company.

Market value to be used

The final determination of the market value of a company’s shares is based on the average price per share paid during the period covered by the financial statements. This value is determined by taking into account the number of outstanding shares and the total amount of dividends declared during the accounting period. If no information about the number of outstanding shares is available, it is assumed that the shares are fully diluted. However, if a shareholder holds less than 10% of the shares, the shares are considered undiluted.

If the shares are listed on a stock exchange, the closing price of the day prior to the date of filing the financial statements is taken as the basis for determining the market value. If the shares are traded over-the-counter, the closing price of one trading session prior to the date of the filing of the financial statements is taken into consideration.

Where the value entered on the Form 41 differs from the valuation actually applied, a note must be attached to the form stating the reasons for the difference.

Meaning of market value

Market value is defined as the “price an asset could sell for” in the open market.

For most stocks listed on the Stock Exchange, the market value will consist of the average of the closing price of the day before the initial public offering (IPO) and the next trading day following the IPO. If the company doesn’t trade publicly, the market capitalization is calculated based on the last traded share price within the previous twelve months.

The market value is the price at wich an asset could be sold on the open market.

A company’s market value is determined by multiplying the share price by the total number of outstanding shares.

This figure is usually arrived at based on the assets, liabilities and shareholder equity of the company.

NICs Agreements

An agreement between an employer and employee will reduce the amount that the employer pays in National Insurance Contributions (NICs). This could save employers money, but it depends how much the employee earns. If the employee earns less than £7,500 per annum, then there are no NICs payable. However, if the employee earns more than £7,500, then the employer must pay NICs based on how much the employee earns over £7,500.

The amount of NICs paid by the employer is calculated by multiplying the number of hours worked by the hourly rate set out in the NI Code of Practice. For example, say you work 40 hours a week earning £10 an hour. Your total weekly earnings are £400. You would normally pay £6.20 in NICs each week. But under an agreement, your employer agrees to pay you £5.50 in wages every week. In this situation, your employer would pay £1.70 in NICs, saving you £0.40 a week.

If you are employed on a salary basis, then the same rules apply. The employer must deduct the appropriate amount of NICs from the employee’s gross salary.

There are some exceptions to this rule. For example, if the employee works part-time, then the employer does not have to pay NICs. Also, if the employee is self-employed, then the employer does have to pay NICs, but the employee cannot claim the tax relief because he/she is already claiming income tax relief.

Employees can benefit from agreements too. They can agree to receive lower rates of basic and additional state pension contributions. And they can agree to pay less into the NHS Pension Scheme.

NICs Elections

Paragraph 3B(1) of Schedule 1 of the SCCBA 1992 states that “employer NICs shall be paid to employees on the gains resulting from their employment.” This provision applies to both full-time and part-time employees.

The purpose of paying NICs is to encourage workers to remain employed. However, it is important to note that employers are not required to make payments under this section. If the employer does not want to make payments, he/she is free to do so.

Employees wishing to receive employer NICs are required to submit a request to the National Insurance Commission (NICs) department before the end of each month following the month in question. An example of such a request is shown here:

If you have any questions regarding the above article, please contact us via email at or call our toll-free helpline number +44 20 7474 5200. You can also find us on Facebook and Twitter.

About Us

Non-commercial actions

are those that do not involve money exchange. They include things like sharing information about products or services, collaborating on projects, or just plain having fun together. However, it is important to note that some activities fall into both commercial and non-commercial categories. For example, a company might provide free samples of a product to bloggers in return for coverage. This could be considered a non-commercial activity because there is no monetary exchange involved, but it still falls under the umbrella of marketing.

Companies within a group of companies can avoid problems by clearly defining what constitutes a commercial relationship. If one member of a group wants to engage in a non-commercial activity with another member of the same group, it is best to make sure that the activity does not violate the rules set forth by the organization. In addition, it is important to remember that even though something seems innocent, it can actually be against the law. For instance, giving out free samples without permission can be illegal.

Finally, non-commercial actions can lead to legal consequences. For example, if you give away a product sample and someone uses it without paying you, that person could face charges such as theft or fraud. Similarly, if you offer to collaborate on a project with a friend and he accepts your offer, but later reneges on his promise, you could find yourself facing criminal charges.

Readily Convertible Assets (RCAs)

Shares and certain securities are RCAs if:

– Shares are deemed to be RCAs if:




The following events will take place during February 2018.

Restricted securities

A restricted security is one where there are conditions attached. This includes shares that cannot be freely traded and bonds that cannot be redeemed. A common example of a restricted security is a convertible bond, where you can buy the stock portion of the investment, but you cannot sell it without converting into cash.


If something happens to make a restricted security worthless, it becomes a forfeiture. If you bought a convertible bond and the company goes bankrupt, you lose the rights to convert into equity. You could still hold onto the bond itself, but you no longer have ownership of the underlying asset.

Different Kinds Of Restrictions

There are three types of restrictions:

• Absolute restrictions – These restrict the transferability of the security. In some cases, the restriction lasts forever. In others, it ends on a specific date.

• Relative restrictions – These restrict how much you can sell the security for. Some relative restrictions last forever. Others end on a specific date. And some do both.

• Collateral restrictions – These restrict what you can use the money raised from selling the security for. Some collateral restrictions last forever. Others expire on a specific date. Still others do both.

Restricted securities elections (for sections 1b, 1c, 2 Security Type B, C and D)

Section 1(a)(i) of the Income Tax Act 1961 provides that where a person makes an election under section 1(b), he shall pay tax on his gain from the disposal of restricted securities. The same provisions apply to persons making such an election under section 1c.

Under section 1(d) of the Income Tax Acts, 1962, 1963, 1964 and 1965, a person making an election under section 1b or 1c must make an application to the Commissioner within 30 days of the date of the receipt of the notice of the decision of the Board of Revenue approving the election. If the application is received later than thirty days, it is considered to have been received on the thirtieth day. In computing the period of thirty days, Saturdays, Sundays and public holidays are excluded.

The term “restricted security” includes a listed security, a preference share, a right issue and any other security which is subject to conditions relating to its transferability. A listed security is one specified in Schedule II to the Companies Act 1956. A preference share is one specified in Schedule III to the Companies Act 1956; a right issue is one specified in Schedule IV to the Companies Act 1956, and a unit trust is one specified in Schedule V to the Companies Act 1956 or a scheme of arrangement entered into pursuant to that provision.

A person making an election under sections 1(b) and 1c of the Income Tax Act, 1962, 1963,1964 and 1965, shall file a return of income for the relevant assessment year within sixty days of the end of the financial year in which the disposal takes place. Such a return shall contain particulars of the amount realised from the disposal of each class of restricted securities held by him during the relevant assessment year.

A person making such an election shall pay tax on the gain from the disposal of any restricted securities held by him on the date on which the notice of the approval of the election is given by the Commissioner.

In case of a person having a net total income exceeding Rs.1 crore, the taxpayer shall be required to furnish a declaration under section 10(2) of the ITA 1961, stating whether the person is liable to pay tax on the gain arising out of the disposal of restricted securities and furnishing the particulars mentioned in sub-section (1).

If a person fails to comply with the requirement of filing a return of income, the liability

Restricted to securities pay elections tax – arises Forms

The immediately ERS upon M30450 the Restricted failure Securities to Election do Form so. is However, approved no for interest use shall in be connection payable with on restricted the securities amount elections due under till section the 425(a)(2) date of of the payment.Canada Business Corporations Act (Canada). This form must be used in conjunction with the ERS M30451 Restricted Securities Election Notice Form.

This form is intended for use by employers nominating one or more individuals for restricted securities elections under section 428 of the Canada Business Corporatiosn Act (Canada). In addition, it may be used where multiple nominations are required for each individual nominated.

Responsible persons

are now required to complete IRS Form 941 for calendar year 2016

The Internal Revenue Service today announced that responsible persons – including employers, agents and issurs – are now required to file Form 941, Employer’s Quarterly Federal Tax Return, for calendar year 2016. This form is due April 15, 2017.

Form 941 is used to report employment taxes withheld from wages paid to individuals who work in the United States. These taxes include Social Security and Medicare taxes, federal income tax withholding, unemployment insurance contributions, and state unemployment insurance contributions.

In addition, Form 941 reports information about the total amount of employment taxes withheld from wages for the current quarter and the previous three quarters. For example, the quarterly return includes the total amount of employment tax withheld for the fourth quarter of 2015.

If you fail to file Form 941 timely, you could face penalties and interest charges. Penalties range from $10 per day up to 25% of the unpaid balance plus interest. Interest begins accruing six months after the date the failure occurred.

Frequently Asked Questions

What replaced Form 42

For those who prefer to file their returns digitally, HMRC has introduced a new system called ‘e-filing’. This is a web based service that lets you upload your return directly onto the government website.

It’s free to register and once registered, you simply log in at the e-filing site and follow the instructions. There are some limitations though – you can only file your return once per year and you can only file it if you earn less than £50,000 per annum.

Who needs to complete an ERS return

The first thing I would do if I was asked about my tax affairs is to ask who wants me to fill out an ERS return? If they say yes then I would have no choice but to comply. But if they don’t want me to file an ERS return then I would not bother filling one out.

HMRC (Her Majesty’s Revenue & Customs) recently announced that they were going to start using credit rating agencies to check whether taxpayers had filed returns correctly. In addition, they are planning to use information technology systems to track down non-filers.


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