Employers must report annually, any reportable events that occur in relation to Employment-Related Securities (“ERS”), which include any shares or other securities that are acquired by reason of employment.
For the 2021/22 tax year, the deadline is 6th July 2022. However, filing the ERS return involves several key tasks that are essential in submitting the return to HMRC and so we recommend that employers start looking at this now, to ensure they meet the deadline. The key points to remember include:
- Registering new plans: For new share plan arrangements (including simple acquisitions of shares by employees and directors including non-executive directors) that occurred in 2021/22, companies must first register “a plan” online with HMRC via the ERS Online Services page.
- Verify or self-certify the tax-advantaged plans in place including Enterprise Management Incentive Plans (EMIs), Share Incentive Plans (SIPs), Save As You Earn (SAYE) plans and Company Share Option Plans (CSOPs). If you do not verify them, you risk the beneficial tax treatment being lost.
- Submit annual returns with all reportable events: The list of potential reportable transactions/events includes (but is not limited to) any acquisition of shares or securities (e.g. loan notes, carried interest, etc.) made by employees or directors, the grant of share options to employees or directors and certain disposals of securities (where these events have given rise to income tax).
- Nil returns: Remember to submit a nil return for all open tax-advantaged and non-tax advantaged plans even if there have been no reportable events in the tax year.
Some of the most common errors/issues we see arising in relation to ERS returns include:
- Using the wrong currency in the ERS return template which will cause the price paid for the shares to be incorrectly reported.
- Failing to include those individuals that are not UK-based employees but carry out duties in the UK during the period of the award.
- Excluding non-executive directors from the “Other” return for non-tax advantaged plans.
- Failing to review, analyse and report correctly any restrictions attached to the shares.
- Failing to report exercises and lapses of EMI options correctly.
Late ERS filings will result in penalties from HMRC as follows:
A penalty of up to £5,000 can also be charged for a material inaccuracy in an ERS return which is not immediately addressed and resolved.
How we can help?
At Alvarez & Marsal Taxand, our Reward and Employment Tax team have extensive experience in advising employers on their ongoing employment tax and NIC obligations.
We can offer a range of advice and services to assist employers in respect of P11D, PSA and ERS Annual Return compliance, as well as providing bespoke advice on all areas of employee reward and employment tax, including short term business visitor returns and special arrangements for tax equalised employees or overseas workers in the UK (App4-8 agreements). Please contact your usual A&M point of contact or Louise Jenkins, Tracey Norton, Clinton Knox, Linda Cameron or Monica Houston.