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Offer shares, options or other securities to your employees or directors?

If so you need to act by 6 July 2021?

Shaun Young, Director, Share Schemes and Employment Tax
11/05/2021
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What is caught?

Any award of shares or other securities (including loan stock, debentures and units in a collective investment scheme) made to an employee or officer of a company or certain LPs and LLPs by reason of employment. These are known as ‘employment related securities’ or ERS.

This applies to both ERS plans and one off awards.

What you need to do

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. The plan should be registered by 6 July 2021 if it was set up in 2020/21.

On an annual basis you must report the award of ERS or the grant of an option. It is also necessary to report any event which might lead to a tax charge including exercise of an option, changes to restrictions and sale of shares at over value. If there have been no events in the year you must make a ‘nil return’.

Typical ERS plans include:

  • Enterprise Management Incentive (EMI) plans – there are important earlier deadlines for the notification of EMI options, please contact us
  • Company Share Option Plans (CSOP)
  • Save As You Earn (SAYE) plans
  • Share Incentive Plans (SIP)
  • all schemes which were previously filed on a Form 42 (‘unapproved’ or non-tax advantaged plans)
  • overseas ERS plans which have UK participants.

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

  1. Register as an employer for PAYE to gain access to HMRC online services.

  2. Register all ERS schemes entered into on or after 6 April 2020 via HMRC Online Services PAYE for employers. If the scheme is a CSOP, SAYE or SIP you will also need to complete the self-certification by 6 July 2021. EMI options must have been notified within 92 days of grant under a registered plan.

  3. File an annual ERS return for all registered schemes by 6 July 2021.

Self-certification

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.

How to register and self-certify an ERS scheme

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.

Once you have access

  1. Login to HMRC Online Services.
  2. Continue past the security message.
  3. Select ‘Services you can use’ in the left-hand menu.
  4. Select ‘PAYE for Employers’.
  5. At the bottom of the page on the right-hand side there is a section called ‘employment related securities’. Select ‘Register a scheme or arrangement’ and follow the on-screen instructions.

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.

Annual ERS filing requirement

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 2021 for 2020/21 and then annually thereafter.

How HMRC use the information filed

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.

Globally mobile employees

ERS plans which include non-UK participants may also need to be reported if an employee worked at any time in the UK during the earning period.

Penalties

If a return is filed after 6 July 2021, HMRC will issue a late filing penalty of £100 on 7 July 2021.

Additional late filing penalties will be charged if the return remains outstanding as follows:

  • three months after the filing deadline £300
  • six months after the filing deadline an additional £300
  • nine months after the filing deadline, further daily penalties of £10 may be charged until the return is filed.

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. 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.

HMRC may also charge penalties for inaccurate returns submitted.

Deadlines

The deadline to register share plans and to submit completed ERS forms to HMRC is 6 July 2021 for the 2020/21 tax year.

Timings to consider

While the 6 July 2021 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.

Registering for  Approximate durations 
Access to HMRC online services  Seven to 10 working days post online registration, or longer if the company is registered outside of the UK, as HMRC post your login details.
An ERS scheme with HMRC  Up to 48 hours for HMRC to issue the unique plan reference number, which is required to submit a return for the scheme.
ERS agent authority  Up to two weeks and possibly more if post gets lost or the authorisation code expires due to delays and a new code is requested. 
An ERS scheme and ERS agent authority  Up to six weeks per the above durations combined. 

Insights / News

Chancellor announces that Enterprise Management Incentive (EMI) is to undergo review.
We look at what the impact of Brexit will be on Enterprise Management Incentive schemes.
Updates to the ‘Loan Charge’ now effective, don’t miss the upcoming deadlines.
An update to EMI share option scheme for furloughed employees.
Chancellor announces that Enterprise Management Incentive (EMI) is to undergo review.
We look at what the impact of Brexit will be on Enterprise Management Incentive schemes.
Updates to the ‘Loan Charge’ now effective, don’t miss the upcoming deadlines.
An update to EMI share option scheme for furloughed employees.

Contact us

Shaun Young
Shaun Young
Director, Share Plans and Employment Tax
London