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Tax Bite - Employment Related Securities / Share Plans Reporting – Deadline Looming

The deadline for employers to report events in relation to employment related shares (and other securities) and share options in respect of tax year 2022/23 is 6 July 2023.

Most companies will know that if they operate an HMRC-approved or tax-advantaged share option / incentive scheme such as EMI, CSOP, SIP or SAYE, there is an annual reporting requirement in relation to events happening during the tax year (from 6^th April to the following 5^th April). Many may be unaware that even if no reportable events have happened during the tax year (say for an EMI scheme, if some options were granted in that or a previous tax year but none have been exercised, lapsed, adjusted etc during the tax year), a nil return is still required, and there are penalties for failure to file on time.

The annual reporting requirement goes much wider than just the schemes noted above, however. There is also a requirement to register an “Other” scheme with HMRC, and provide annual returns (again including nil returns where appropriate) for a whole host of other events relating to employment related shares and securities. This includes, amongst other things: -

• Acquisitions of shares by employees / directors (or persons connected to them). This reporting requirement applies irrespective of how the shares were acquired, e.g., whether issued or transferred, for payment or otherwise, or on a rollover transaction. Reporting is also necessary even if market value was paid for the shares and no income tax liability arose;

• The grant or exercise of (or other events relating to) share options outside of the schemes noted above i.e., “unapproved” share options, again irrespective of whether or not tax was triggered;

• Any shares sold for more than market value; and

• A number of events under certain other specific income tax charging rules for employment related shares and securities e.g., lifting of restrictions on shares, events relating to convertible shares / securities, certain increases / injections of value into shares, and receipt of other benefits in respect of shares that have not already been subject to income tax.

Transactions involving shares or options owned by non-UK employees or consultants would not typically need to be included in reporting.

Reporting must be completed electronically using HMRC’s “ERS Online” system. Employers first need to have registered for PAYE online services and created / registered the relevant scheme on ERS Online in order to then be able to submit annual returns. If a company has events to report for tax year 2022/23 and didn’t realise this, and doesn’t already have any schemes registered with HMRC (say if some employees acquired shares for market value during the tax year) then the company will need to move quickly to set up the scheme on ERS online, in order to be able to file the annual return on or before the 6 July deadline, noting that a new scheme typically will take around 7 days from having been set up to become “live” on ERS online.

We have a lot of experience in helping companies with their year-end ERS compliance. We can work with companies to gather all the information needed for the report and access and complete the reporting sheets so that all the company has to do is upload and submit the forms we prepare. So, if you have clients who may need our help with their ERS reporting, please do get in touch.