Annual employment-related securities return – filing deadline 6th July
Annual employment-related securities (ERS) return for the tax year 2022/23 needs to be submitted to HMRC by 6th July.
HMRC doesn’t send reminders to file employment-related securities return, but they will issue automatic late filing penalties which start at £100 per scheme.
Who needs to submit an employment-related securities return?
ERS returns have to be completed by Employers in respect of UK directors, employees or employees with UK work duties who have acquired shares or other securities in their company; or if their company operates an employee share plan or arrangement.
ERS returns are required to report events relating to securities which involve employees and/or directors.
What is covered by ERS?
There are a variety of schemes and payments which are considered to be caught under the ERS bracket. The events and transactions that can be classified as ERS are wide-reaching and the rules can apply even if there is no formal employee share plan in existence.
This could include (but is not limited to):
- HMRC tax-advantaged plans (EMI, CSOP, SAYE/Sharesave and SIP)
- Share acquisitions and disposals
- Share options
- Share-for-share exchanges
- Overseas plans with UK participants (e.g. RSUs, RSAs and ESPPs)
- Group re-organisations and other corporate transactions
- Variations in share capital
- Carried interest arrangements
- The lifting of restrictions attached to shares (including on disposal)
- Restricted stock units (RSUs) and restricted stock awards (RSAs)
- Transactions involving loan notes or warrants
- Units in investment schemes
How is an ERS return submitted?
A company must ensure it has registered its share schemes and ERS events properly online via the HMRC PAYE portal.
Any scheme registered online will require annual ERS returns to be filed for subsequent tax years, irrespective of whether there have been any reportable events in those tax years, unless the scheme has been formally closed by entering a ‘date of final event.’
If you have nothing to report, you must submit a nil return.
ERS returns must be submitted by 6 July following the end of the tax year.
Common problems with ERS
Part of the difficulty is that the definition of ERS is fairly broad and many different types of schemes and payments are caught by this category. Often employers don’t recognise that transactions are reportable via an ERS return, or may mistakenly fail to deduct income tax and NIC through PAYE, which then becomes apparent when the return is being filed.
Other issues which should be considered are:
- Failure to register a CSOP, SIP or SAYE scheme online by 6 July following the tax year in which the first awards were granted. This will result in any awards granted in that previous tax year not qualifying for the associated tax reliefs
- Failure to notify HMRC of the grant of EMI options within 92 days from each grant date
- Global equity plans with UK participants, where UK tax/reporting treatment may be different to that of the plan’s ‘home’ country
- Employees/directors acquiring/disposing of shares at a price that is different to the market value for tax purposes
- Share class redesignations or other restructuring
- Share for share exchanges, bonus issues and rights issues involving employees
- Transactions in one individual’s shares which affects the value of another person’s shares
- The lifting of restrictions attached to shares, for example if shares were subject to a forfeiture provision for a limited time and that time has passed
- Gifts of shares to friends
Are there any exemptions For ERS returns?
There are some circumstances that provide an exemption for ERS returns.
Some instances which may mean an employment-related securities return is not required include:
- Scrip dividends
- Share for share exchange
- Flat Management Companies
- Normal exchange of shares between family members or within personal relationships
- Members’ clubs (which have been formed as companies)
- Bonus or rights issues
- Dividend reinvestment plans
- Shares which have been acquired by employees independently
We recommend that you always get professional advice before determining whether an event can be excluded from ERS reporting.
Need our help?
If you have any questions about ERS or require assistance in keeping up to date with your filing obligations, please get in touch.
Also, if you are looking to implement a share plan and need our advice to create the right one to recruit and retain the best talent then we can help with this too.
The information was correct at time of publishing but may now be out of date.