Piles of coins stacked on quarters of a coloured pie chart with hands reaching for the coins
Employment Related Securities – it’s annual return time

Employers commonly offer Employment Related Securities (ERS) to employees as a financial incentive to encourage them to remain with the business. A range of schemes can be offered - these include both tax advantaged share schemes such as Save As You Earn (SAYE), Company Share Option Plan (CSOP) and Enterprise Management Incentives (EMIs), and non-tax advantaged schemes.

For both tax-advantaged and non-tax advantaged schemes, it is necessary submit a return to HMRC by 6 July each year. The deadline for 2024/25 returns is therefore 6 July 2025. If you are reporting for an EMI scheme, this is via a separate return but it is due on the same date.

When might an ERS return be needed?

You might need to submit an ERS return where securities (including shares) have been made available by reason of a current, former or prospective employment. The main exception to the ERS rules is where the shares are transferred because of family or personal relationships as opposed to an employee/employer relationship. For instance, shares in a family owned company might be transferred by parents to their adult children if the next generation is intending to take on running the business.

It is necessary to submit an ERS return for each scheme in place, even if this is a nil return.  Once ERS returns start being submitted for a share scheme, HMRC will expect a return each year until they have been told the scheme has ended.

The purpose of the ERS return is to disclose that an ERS transaction has taken place. The employer needs to complete the relevant template to submit with the online return. In the case of shares transferred to an employee (whether by the employer or otherwise), this would include:

  • the market value of the shares,
  • the amount paid by the employee (if anything), and
  • whether an amount has been subject to PAYE via the payroll.

The amount subject to PAYE is relevant where the shares could be considered a readily convertible asset because there exists a market for their sale.

Where shares have been given to employees or sold for less than market value, and therefore tax is due, HMRC are likely to use the information in the ERS return to check the entries in the employee’s Self Assessment tax return.

How do I register for ERS returns?

When an ERS reporting requirement first arises, it is necessary to register the ERS scheme with HMRC in order to obtain a scheme reference number. 

Registration of the ERS scheme can take place within the PAYE online Services for employers under the section on ERS. There is the option to ‘Register or view your schemes and arrangements’ and HMRC will issue a scheme reference within seven days of registering the ERS scheme. Employers needing to register a new scheme will need to plan around this delay in order to meet the 6 July submission deadline.

Once set up, it is possible for an employer to authorise an agent to submit ERS returns using the Business Tax Account.

 

This article reflects the position at the date of publication. If you are reading this at a later date you are advised to check that that position has not changed in the time since. 

We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.