The deadline to file annual share plan returns is July 6th.

If you have previously registered a scheme with HMRC, you must submit an online end-of-year return for each registered scheme by midnight on 6th July. This is in addition to any notification of EMI options being granted. An inaccurate or non-filing annual return may result in a penalty. It is also possible that you or your employees could lose any tax advantages associated with the scheme.

The return must be filed even if there is no reportable activity. A 'nil' return must be completed if there are no outstanding qualifying options but you have registered the scheme, or if there are outstanding qualifying options but there have been no activities. 

When should a return be filed? 

An annual ERS return is required to report events involving securities (such as options, shares or loan notes) involving employees and/or directors (including founding directors).

Through the HMRC PAYE portal, companies must ensure that their share schemes and ERS events are properly registered. One-off transactions (such as certain corporate transactions or reorganisations) are potentially reportable even if they are not part of a formal share scheme. Outside the UK, shares/securities may also need to be reported. 

Consequently, we recommend that any activity involving UK employees/directors involving shares, options, or other securities should be reviewed to determine if registration or reporting is required.

If a scheme is registered online, it will require annual returns to be filed for subsequent tax years regardless of whether there have been any reportable events, unless it has been formally closed by entering a 'date of final event.' 

Can you tell me what is reportable?

Employment-related securities can cover a wide range of events and transactions, and ERS rules apply regardless of whether an employee share plan exists. 

The following could be included (but are 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; and

• units in investment schemes.

Issues that commonly arise

Many employers fail to recognise that share transactions need to be reported via an ERS return. They mistakenly do not deduct income tax and NIC through PAYE, which becomes apparent only when the annual return is filed. 

The following are common issues we have encountered:

• Registration of CSOPs, SIPs, and SAYE schemes online after 6 July following the tax year in which the first awards were granted. As a result, any awards granted in the previous year will not qualify for tax relief; 

• Not informing HMRC of the grant of EMI options within 92 days of the grant date;

• Equity plans with UK participants whose tax/reporting treatment differs from that of the plan's country of origin;

• For tax purposes, employees/directors must acquire/dispose of shares at a price that is less than the market value. In the case of minority shares, for example, a pro-rata payment could be made;

• Redesignation or restructuring of share classes that increases the market value of particular shares;

• Exchange of shares for shares, bonus issues, and employee rights issues; 

• An individual's share transaction that affects another's share price;

• Lifting restrictions attached to shares, for instance if the forfeiture period for shares has expired; and

• Giving shares to friends as gifts.

ERS returns are not ot reminded to be filed, but automatic penalties are issued. In the event that annual ERS returns are not filed for each open scheme by 6 July following the end of the tax year, HMRC can impose automatic late filing penalties (beginning at £100 per scheme). Additionally, penalties can be imposed for returns containing a 'material inaccuracy'. 

Employers' responsibilities

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

Having these arrangements updated ensures compliance with legislative changes and HMRC guidance, as well as their effectiveness.

The earlier you review your ERS reporting, the more time you have to prepare and submit the returns ahead of the deadline of 6 July. 

You can contact Zyla Accountants with any questions or concerns about ERS or for assistance with keeping up with your filing obligations.