Employment Related Securities (ERS), is a very inclusive category. Any award of shares or other securities (including loan stock, debentures, restricted stock units and units in a collective investment scheme) made to an employee or officer of a company or certain LPs and LLPs by reason of their employment will be included. Any changes with these securities after they are awarded, such as the exercise of options or the cancellation of options for consideration, will also be caught.
This applies to both ERS plans and one-off awards.
Firstly, you must register your plan with HMRC if you haven’t already done so and ‘self-certify’ if it is a tax advantaged plan. Even a one-off award is considered a ‘plan’ for the purposes of ERS reporting to HMRC and must be registered in the same way. The plan should be registered by 6 July 2023 if it is either tax advantaged and established in 2022/23 or it is non-tax advantaged and first used in 2022/23. If the plan is not registered before 6 July 2023, it may lose its tax advantaged status.
Secondly, on an annual basis you must report the award of ERS or any other reportable action including, but not limited to, the grant of an option, the exercise of an option, the cancellation or lapse of an option in exchange for consideration, changes to restrictions in any securities held, or sale of shares at over market value. If there have been no events in the year, but the plan is registered with HMRC, you must make a ‘nil return’.
Typical ERS plans include:
Please note, only the company can register the plan(s) via the HMRC online services; ERS agents can only view registered plans and file returns for registered plans.
Quick three step ERS compliance requirements
As CSOP, SAYE and SIP are tax advantaged plans, you need to complete a declaration which states the plan meets the requirements of the relevant legislation at either the date of registration or when the first option grant/award is made. This declaration is known as self-certification.
It is the company secretary’s responsibility to ensure all applicable ERS schemes have been self-certified.
To register your schemes and arrangements, you need access to HMRC Online Services and PAYE for employers. Please note payroll agent PAYE access to HMRC Online Services is different from PAYE for employers’ online access, and registration of ERS plans cannot be done via the agent login.
If you have not yet registered with HMRC as an employer, follow the required process on the GOV.UK website. Prior to registering for online access, please ensure HMRC have the correct correspondence address for the company on their PAYE records as they will post your login details to that address.
While we are not able to register schemes directly, should we be instructed to act as your ERS agent, we would be more than happy to assist you with this process if required via meetings and conference calls.
In addition to registering the ERS plan(s) with HMRC there is also a compliance obligation to file an annual ERS return by 6 July 2023 for 2022/23 and then annually thereafter.
It is vital to make sure all information reported on the ERS return is accurate, as HMRC may cross reference the data with other connected information they are provided with such as the corporate tax return, payroll submissions and individual self-assessments to ensure there are no conflicts.
The reporting and taxation of equity is particularly complex when it comes to globally mobile employees. These may be UK employees in UK plans who spend time working outside the UK or participants in non-UK equity reward plans who work in the UK either for a UK employer or on an overseas secondment basis.
The UK payroll withholding for such individuals can be very difficult from a PAYE and National Insurance perspective.
ERS plans which include non-UK participants or UK participants in overseas plans may also need to be reported to HMRC by 6 July 2023 if an employee worked at any time in the UK during the earning period.
If a return is filed after 6 July 2023, HMRC will issue a late filing penalty of £100 on 7 July 2023.
Additional late filing penalties will be charged if the return remains outstanding as follows:
As well as the late filing penalties, HMRC may also issue a penalty not exceeding £5,000 if a return is found to contain a material inaccuracy that was careless or deliberate, or if the return is not corrected once the company becomes aware that the return is incorrect.
Please note the registering of any plan creates an annual filing obligation. If a plan is registered but no reporting events occur during the tax year, a nil return still must be filed. The obligation to file only ceases when once the scheme has been closed down. Likewise, if a plan is incorrectly registered, a nil return is required to be filed after which the scheme should be closed down. Failure to do so may result in late filing penalties being issued.
The deadline to register share plans and to submit completed ERS forms to HMRC is 6 July 2023 for the 2022/23 tax year.
Timings to consider
While the 6 July 2023 deadline may seem far away, we recommend starting the process as soon as possible. Unforeseen delays may occur in determining which events are reportable, obtaining the required information, gaining access to HMRC online services and registering schemes with HMRC; these could lead to late penalties being issued.
The table below offers some approximate timescales; these may be useful to keep in mind.
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