The deadline for filing your annual employment related securities ("ERS") return for the 2022/23 tax year is 6 July 2023.
Transactions involving ERS that have occurred within the tax year ended 5 April 2023 may be required to be reported via the HMRC online portal on or before 6 July.
What is an employment related security ("ERS")?
ERS are broadly securities that have been acquired or deemed for tax purposes to be acquired by reason of an employment. Securities can include shares, share options, loan notes and debt instruments such as debentures.
The deeming provision means that many employees and directors who hold shares in their employer group have acquired ERS even if they do not consider those securities to have been acquired by reason of employment.
Any new ERS schemes must be registered on the HMRC online portal. Such schemes include one-off awards of shares or other securities to employees and/or directors. You will need to register the ERS scheme before you can submit an ERS annual return, you should therefore ensure you leave sufficient time to register before the 6 July deadline.
What is a reportable event?
If there have been any arrangements involving securities held by your employees, you should consider carefully whether a report needs to be made.
Common reportable events include:
- The acquisition of shares or other securities by employees and/or directors
- The grant and exercise of share options
- The disposal of shares or other securities for more than market value
- Changes of any rights and/or restrictions of securities
The grant of options under an Enterprise Management Incentive ("EMI") plan must be reported within 92 days of the date of grant. Failing to report the grant of an EMI option may result in the loss of its tax benefits.
If you are an employer operating an ERS scheme but there have been no reportable events, you must submit a 'nil return'.
Changes to ERS reporting
There have been some minor changes to the ERS reporting requirements from 6 April 2023.
It will now be mandatory to provide the following information:
- PAYE reference of the employing company
- National Insurance Number of individual
- Confirmation whether PAYE has been operated (this has already been mandatory in some instances)
Other descriptive changes have been made to HMRC's return template to clarify what information is required.
Penalties for late reporting
Failure to file an annual return on time will result in penalties. The penalties will be as follows:
- Automatic £100 penalty if submitted after 6 July;
- Further £300 penalties if the return remains outstanding after three and six months;
- Penalties of £10 a day may be charged for returns that remain outstanding nine months after the deadline.
How Brodies can help
If you have any questions in relation to the matters discussed in this article or would like to hear more about your ERS reporting duties, please contact a member of the Corporate Tax & Incentives team.