What are Employment Related Securities and when should they be reported?
If your company provides or transfers shares to employees or directors, it is likely that you will need to submit information about these on an Employee Related Shares (ERS) return to HMRC. On the return, you will need to tell HMRC about any new ERS schemes acquired by employees, and any schemes that have finished.
ERS schemes are a method for transferring shares to employees of the company, including directors. ERS schemes can either be tax-advantaged or non-tax advantaged. ERS applies to all types of share award such as growth shares, restricted shares, changes to share rights, share buy backs and options such as EMI, CSOP and unapproved options.
All new ERS schemes need to be registered with HMRC because there may be income tax liabilities for the employees taking part in them, even if it is a one-off gift of shares.
Every year you will need to file an ERS tax return whilst the ERS scheme is active. The deadline to submit returns is by 6 July following the end of the tax year. Even if you aren’t actively transferring shares that year, but you have live ERS schemes, you’ll still need to submit a return – or a nil return each year in the following circumstances:
- there have been no reportable events
- there have been no transactions
- you have appealed a late filing penalty
- the scheme has been registered in error or there’s a duplicate scheme
- you did not get a reminder from HMRC.
There are however circumstances where an ERS returns may not be required – for instance, a share transfer in the normal course of domestic, family, or spouses does not need a return. You also do not need to file an ERS return if the share transfer is to shareholders who are not employees or directors, or if the transfer of shares takes place before the company starts trading.
Failure to report on time will result in automatic penalties and loss of tax advantages for certain share awards.
The penalties range from £100 for missing the submission deadline, increasing to a £300 penalty if 3 months late, an additional £300 at 6 months late and from 9 months over the missed deadline, you will be charged £10 per day.
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.
(E) firstname.lastname@example.org or (T) 01908 219100 (W) advaloremgroup.uk