April brings many exciting things: lighter mornings and evenings, sunnier, warmer days, but most exciting of all – the Employment Related Securities (ERS) annual reporting season!
What Is ERS Annual Reporting?
Employment Related Securities are securities acquired by individuals as a result of their employment. Securities may be shares or options, and the individuals include employees, directors or office holders of a company.
ERS annual reporting is a statutory requirement for UK companies that operate employee share schemes or have had reportable events involving ERS.
Whether you have an Enterprise Management Incentive (EMI) scheme, Company Share Option Plan (CSOP) or another type of arrangement, if the company has a scheme registered on the HMRC online portal, a return must be submitted each year.
Understanding the Complexity of ERS
In all seriousness, the ERS season often brings with it a level of uncertainty. The ERS legislation is complex and for many the unknown of what is required can be daunting, especially with the added pressure of late filing penalties hanging in the air.
So, what are the important facts that every Company should know about ERS annual reporting?
Does Your Company Have an Active ERS Scheme?
If the Company has an active ERS scheme on the HMRC portal, an annual return must be filed. These schemes may be an EMI, a CSOP, a SAYE, a SIP or an “Other” scheme, depending on the specific share scheme the Company may have in place. It may also be that one off events involving shares or other securities which have occurred outside of a formal employee share scheme may also need to be reported.
Have Employees or Directors Acquired Securities?
Events related to securities acquired by employees, directors, or office holders will be reportable. When securities, such as shares or options, are acquired by way of employment, they will be reportable for ERS in the relevant return. The rules around “by way of employment” are nuanced, and recent case law has widened the scope of who is caught by those rules. Further, the legislation extends beyond current employees and directors to former and prospective individuals too.
No Tax Due? You May Still Need To Report
Even where no tax is due, there is still a reporting requirement. Often, employees and directors will acquire shares at their market value, meaning there would be no tax implications to arise. Similarly, when options lapse or are exercised, there may be no tax liability. However, even when this is the case, the event may still be reportable.
ERS Reporting Is Key During Due Diligence.
ERS will inevitably come up during a due diligence exercise. A due diligence is a significant process to undertake, and a company’s ERS reporting will no doubt be scrutinised as part of this exercise to ensure all i’s are dotted and t’s crossed. By ensuring reporting is completed accurately and in a timely manner, a company can breathe a little easier in the knowledge they have all the necessary information to hand when it is called upon and avoid unnecessary delays in the DD process.
Failure to report can result in penalties.
And no company wants to spend money on late filing penalties!
How We Can Help with ERS Reporting
These points above don’t drive into the details of what may be reportable and how they must be reported. Fortunately, this is an area of tax where our team thrives! With years of experience, we are here to help anyone with their ERS questions and filing needs, no matter how big or small. Whether its helping companies complete returns for the first time, understanding the reporting requirements of their specific scheme, or diving deep into HMRC’s guidance and legislation on even the trickiest of questions, we are here and we are ready!
Key Dates for ERS Reporting 2024–25
The ERS reporting window for 2024-25 (which covers reportable events which fall between 6 April 2024 and 5 April 2025) opens on 6 April 2025 and all returns must be filed with HMRC by 6 July 2025.
Get in Touch
If your company has a filing requirement or you have questions about ERS reporting, now is the time to get in touch. Please contact a member of the team, or reach out to ers@cooperparry.com
