The annual registration and returns submission deadline of 6 July 2024 for employment-related securities (ERS) is just around the corner.
If your company has any employee share schemes in place, any of your employees or directors have acquired shares, or any other ERS transactions have taken place, you may have a filing obligation.
This means that share schemes and ERS must be registered and the relevant returns submitted prior to this date, or you risk facing penalties and jeopardising the tax-advantaged status of your company's schemes.
HMRC will not issue any form of reminder prior to the deadline, so it is sensible to submit all required returns as soon as possible to minimise the risk of any slipping through the cracks. It should also be noted that 6 July falls on a Saturday this year.
What do I need to do?
ERS schemes are subject to registration and reporting requirements. Firstly, any new approved (i.e., tax-advantaged) schemes set up in the financial year ending 5 April 2024 must be registered by 6 July 2024. Enterprise Management Incentives (EMIs), Company Share Option Plans (CSOPs), Save-As-You-Earn (SAYE) and Share Incentive Plans (SIPs) are all forms of tax-advantaged plan which must be registered with HMRC following the end of the tax year in which they were established. Secondly, returns for each registered scheme must be submitted by 6 July 2024.
In contrast to approved schemes, unapproved (i.e., non-tax-advantaged) schemes do not need to be registered with HMRC immediately after they are set up. Instead, this type of plan only needs to be registered following the end of the tax year in which the first reportable event occurs. This means that if your company set up an unapproved plan prior to 5 April 2024, but there were no reportable events, such as a grant of options prior to this date, the plan will not need to be registered with HMRC by 6 July this year, and no return will need to be submitted.
In practice, it is likely that the first reportable event will occur when a plan is set up. For example, a scheme will be adopted, and the initial grant of options will be granted around the same time, so it is important to confirm whether the registration requirement has been triggered.
One common misconception is that ERS returns only relate to share scheme activity. There are a number of other situations where these returns are due, e.g. transactions carried out by UK resident employees or directors in the company's shares.
Do I need to submit a return for a scheme that has now been terminated?
If your company had a share scheme in place which was terminated in the financial year ending 5 April 2024, a final return must still be submitted to HMRC by 6 July 2024, including the last date on which a reportable event occurred.
How do I submit a return?
Returns should be submitted using HMRC's employment-related securities online portal. Before you can make a submission through the portal, you must have registered for the service and registered each plan for which a return will be submitted. This should not be left until the last minute, as the registration process can take several days.
Once submitted, it is not possible to retrieve a copy of the returns, so screen captures should be made of each page as you advance through the process. It is recommended that these captures be amalgamated into a single document and kept secure, so that you have a record of submission on file.
Do I still have to submit a return if there have been no grants or exercises of options under a plan?
Yes – returns must be submitted for all registered plans regardless of whether there have been any reportable events. If there have been no reportable events, such as a grant or exercise of options under a plan, in the financial year ending 5 April 2024, then a nil return must be submitted.
Do I need to submit separate returns for each plan my company has in place?
Here, the rules for reporting differ between approved and unapproved plans. If your company has multiple unapproved plans in place, you can submit a single return covering each of the schemes.
When it comes to approved plans, however, returns for each scheme that your company operates must be submitted individually. Please refer to the list of tax-advantaged schemes above for examples of plans for which unique returns must be submitted.
HMRC provide templates for each type of tax-advantaged plan, as well as a template for 'other' (i.e., non-tax-advantaged) plans. These can be accessed here. It is important to ensure you are using the 2024 templates when preparing and submitting your returns, as there may have been changes in the financial year since you last submitted returns. For example, the value of options that can be granted to a participant under a CSOP increased from £30,000 to £60,000 in FY2023-24, a change which is reflected in the latest return template.
What happens if I don't submit the ERS returns on time?
Failure to submit a return for a registered plan by the 6 July 2024 deadline will result in an immediate penalty of £100 per scheme. If the return remains outstanding 3 months after the deadline (6 October 2024), the penalty will rise by a further £300, and after six months (6 January 2025), HMRC may impose further fines at its discretion. By failing to submit the ERS return on time, you also risk losing any tax advantages conferred by the registered plan, which could result in a substantial tax bill on the exercise of the options.
This article was Co-authored by Trainee Hamish Montgomery
6 July 2024 for employment-related securities (ERS) is just around the corner.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.