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Employment Related Securities Return

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18 June 2021

If you provided your employees with shares or share options during the 2020/21 tax year, then there are just a few months to go before you need to file the 2020/21 details with HMRC.

The deadline for completing the Employment Related Securities (ERS) return is 6 July. We take a look at the ERS return and what you need to do if this annual tax information requirement applies to you.                       

What is the Employment Related Securities Return?

The ERS return is required by HMRC to report shares and securities acquired by employees.

You are required to submit an ERS return annually if you are an employer that operates a share scheme for your employees, or you reward or provide incentives to employees in the form of shares, which are collectively known as employment related securities (ERS). This applies to both tax-advantaged and non-tax advantaged plans and includes one-off awards or share gifts and also applies even if there have been no share or security transactions during a tax year and you receive a notification from HMRC to submit an ERS return.

By submitting an ERS return, you are informing HRMC of a reportable event during any given tax year in relation to employee shares and securities. It doesn’t necessarily follow that a subsequent tax charge will arise from submitting the return, as this will depend on the nature of any transactions that have occurred during the reporting period. And remember, even if there have been no transactions during the reporting period, you must still submit a ‘Nil’ ERS return if a return has been requested by HMRC.

What is a reportable event?

A reportable event most commonly occurs when shares or securities are acquired by an employee and includes share plan activity as well the opportunities to invest in a fund, shares or other carried interest arrangements.

The rules for a reportable event in relation to an ERS return are also wide-ranging and include past and present employment, as well as immediate family members. For this reason, we recommend seeking professional advice if you are unsure if you have any reportable events to file.

Who needs to submit an ERS return?

It is not the employee’s responsibility to file an ERS return, it is the employer who is operating the scheme (or an agent acting on their behalf) or the person from whom the securities or options were required. A parent company can also complete an ERS return for all the participating employees within the group.

All returns must be submitted by 6 July, for the previous tax year, up to 5 April.

How to file and ERS Return

All ERS reporting for the tax year-end must be done via HMRC Employment Related Securities (ERS) online.

All companies that operate a share or securities scheme for their employees must register first with the ERS as part of the PAYE for Employers online service.

Potential penalties

Failure to submit an ERS retrun if you need to report any transactions can attract a penalty if not filed by the 6 July due date. A penalty can also be applied if you fail to submit the form within 30 days of the issue date on an HMRC notification.

 The penalties range from £100 for missing the submission deadline, increasing to £300 each for being three then six months late. From nine months over the missed deadline, you will be charged £10 per day.  Recent figures indicate that around one-third of ERS returns were submitted late.

What to do next

If an ERS return applies to you and your employees, you must complete and return the required information by 6 July, otherwise you could incur penalties for a late submission.

If you are in any doubt about your obligation to file an ERS return or need further advice on how to complete and submit the form correctly, you can contact our tax team.

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