The deadline is approaching for companies to complete their year-end reporting requirements for any arrangements involving securities held by their employees, including share options, other share awards and share acquisitions where these have occurred between 6 April 2024 and 5 April 2025. Reporting may also be required regarding any non-UK resident employees who carry out work duties in the UK. The deadline for filing this annual Employment Related Securities (ERS) return is 6 July 2025 via the HM Revenue & Customs (HMRC) ERS online service.
ERS are broadly securities (eg shares, share options, loan notes and debt instruments) that have been acquired or deemed for tax purposes to be acquired by reason of an employment. The wide deeming provision means that many employees and directors who hold shares in their employer group will have acquired ERS.
By 6 July the company must have:
- Registered to use the service.
- Registered each plan or arrangement.
- Self-certified any UK tax-advantaged plans such as Company Share Option Plans and Enterprise Management Investment (EMI) plans.
- Reported a number of events related to ERS that have occurred during the relevant reporting period.
The rules catch all ERS acquired by UK employees or directors by reason of their employment, including participation in non-UK arrangements, such as French “free share” plans or US employee stock purchase plans.
Common events that need to be reported include the following:
- The grant and exercise of share options.
- The acquisition of shares or other securities.
- The cancellation of existing share option or share awards.
- The disposal of shares or other securities for more than market value.
- Changes of any rights and/or restrictions relating to the securities.
Even if there have been no reportable events (eg no grants or option exercises) relating to the ERS scheme in the year, the company must still submit a “nil return”. This must continue for each year until HMRC has been notified through the ERS online service that the plan has ceased.
It may take several days to register to use the ERS online service, and so companies should do this as soon as possible.
If a company does not file an annual ERS return on time, penalties will be incurred, which can become quite substantial. The penalties are as follows:
- There is an automatic £100 penalty if the return is submitted after 6 July.
- There are £300 penalties if the return remains outstanding after three and six months.
- Then, penalties of £10 a day may be charged for returns that remain outstanding nine months after the deadline.
In addition to penalties for failing to file annual returns, the failure to register a tax-advantaged plan or to report the grant of EMI options can affect the tax treatment of the participants.
Need advice?
Farrer & Co can help you manage your ERS reporting and, more generally, assist you in choosing an incentive plan and tailoring it to your business. We can implement the plan, register it with HMRC (as required) and explain to all participants how it works.
For further information please contact David Gubbay or your usual contact at Farrer & Co.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, May 2025
