Employment-related securities annual returns – deadline looming

The deadline for employers to file their annual employment-related securities (ERS) returns with HMRC for the 2024/25 tax year is approaching.

You will likely have a requirement to file by 6 July 2025 if:

• UK directors, employees, or employees with UK work duties have acquired shares or other securities in your company.
• Your company operates an employee share plan or arrangement.

When is an ERS return required?

Annual ERS returns are required to report events relating to securities (such as options, shares or loan notes) involving employees and/or directors, including both founding directors and non-executive directors.

A company must ensure it has registered its share schemes and ERS events properly online via the HMRC PAYE portal. Transactions do not need to be part of a formal share scheme to be potentially reportable and can include “one-off” events (for example, certain corporate transactions and re-organisations). Reporting may also be required for shares/securities located outside of the UK.

We recommend reviewing any activity involving UK employees/directors that involves shares, options or other securities to confirm whether there is a registration and reporting requirement.

Any scheme registered online will require annual 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.

What is reportable to HMRC?

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, such as enterprise management incentives (EMIs), company share option plans (CSOPs), save as you earn (SAYE)/sharesave, and share incentive plans (SIPs).
• Share acquisitions and disposals.
• Share options.
• Share-for-share exchanges.
• Overseas plans with UK participants, such as restricted stock units (RSUs), restricted stock awards (RSAs) and employee stock purchase plans (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).
• Transactions involving loan notes or warrants.
• Units in investment schemes.

Common issues with ERS returns

Employers often do not recognise that share transactions are reportable via an ERS return or may mistakenly fail to deduct income tax and National Insurance Contributions (NICs) through PAYE.

This oversight might only become apparent when the annual ERS return is being filed.

Common issues include:

• 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 (if the option was granted before 6 April 2024).
• Global equity plans with UK participants, where UK tax/reporting treatment may be different to that of the plan’s “home” country.
• Employees or directors acquiring/disposing of shares at a price different from the market value for tax purposes. This could be the case if, for example, a pro-rata value is paid for minority shareholdings.
• Share class re-designations or other restructuring, particularly if it results in an uplift in the market value of particular shares.
• Share-for-share exchanges, bonus issues, and rights issues involving employees.
• Transactions in one individual’s shares affecting 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.

HMRC does not send reminders to file ERS returns, but will issue automatic late filing penalties.

If annual ERS returns have not been filed for each open scheme by 6 July following the end of the tax year, HMRC can levy automatic late filing penalties (starting at £100 per scheme). Returns containing a “material inaccuracy” can also result in additional penalties.

Next steps for your ERS return

We always recommend carrying out regular reviews of your employee share arrangements and the ways in which they operate alongside the annual returns process.

This ensures the arrangements remain compliant with legislative changes and updates to HMRC practice or guidelines, and that they are achieving their intended purpose.

Reviewing your ERS reporting as early as possible also ensures you have sufficient time to prepare and submit the returns ahead of the 6 July deadline.

If you have any questions or concerns about ERS or need help keeping up to date with your filing obligations, please get in touch with Fiona Bell, Simon Adams, Martin Cooper or your usual 91̽»¨contact.