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Annual reporting for Employment Related Securities (ERS) schemes is fundamental for businesses with share plans or ‘reportable events’ relating to share transactions involving employees or directors. This applies to both ‘approved’, ie tax advantaged, share plans like Employee Management Incentive (EMI) option schemes, and ‘unapproved’ schemes where there is no tax advantage but, for instance, an employee has simply received some shares. The requirement to register an ERS scheme and file an annual return with HMRC is very widely drawn and employers can become liable without realising it.  For instance, if shares are transferred between two directors, this can be reportable.  

In some cases, there may be a personal tax liability for an employee or director as a result of ERS transactions, and in some cases, an additional PAYE liability and filing obligation for the employer as well. This requirement applies to both private and listed companies with the responsibility of reporting falling on the employing company or its parent company, depending on the precise circumstances.  

When is the deadline?  

The ERS return for each tax year must be submitted by 6 July, following the end of that tax year. The reporting window opens on 6 April, giving companies three months to file their returns via their PAYE for Employer’s account on the Government Gateway.  

What if I submit the form late?  

If you miss the 6 July deadline, you will incur an initial £100 penalty. A further £300 penalty is imposed if the return remains outstanding on 6 October and another £300 penalty arises if it is still outstanding by 6 January. Continual non-compliance may attract further penalties and increased scrutiny from HMRC.  

How can I prepare?  

• The ERS returns are long, and completion can be complex. Starting early is therefore essential to avoid incurring any penalties. Make sure to initiate the reporting process in advance and allow ample time for registering the scheme (if required), data collection and submission 

• In some cases, the employer is required to value the shares relating to the reportable transactions. This can be a complex matter so it’s important to identify such cases as early as possible so that the valuation can take place.  

• Your business may have international mobile employees who must be considered. If an employee has left the UK, there could still be a reporting requirement for the individual and their reporting is often missed 

• Remember to submit nil returns for all open plans where there was no activity in the year, as HMRC will charge penalties in respect of missed returns 

• It is vital to save confirmation of submission receipts for all returns along with a copy of the final return submitted, as HMRC will not provide you with copies of submitted returns 

• If your plans have closed, they will need to be officially closed through the Company’s Government Gateway – this is often missed, resulting in further penalties arising 

• If you wish to appoint your accountant to file your return on your behalf and liaise directly with HMRC on ERS matters, this is not covered by your standard agent authority and must therefore be put in place separately. This can take some time so must be started well in advance of the 6 July deadline. How we can help 

mgr offers assistance in identifying your reporting obligations, registering with HMRC and ensuring compliance to avoid penalties. For more information and assistance, contact Nerissa Payne at nerissa.payne@mgr.co.uk.