In recent years it has become more common for employers to provide equity based rewards and incentives as a means of attracting, rewarding and retaining key individuals. Typically, this will involve an issue of shares, or the granting of an option, as an alternative to paying cash bonuses.
Companies that provide shares or securities to their directors or employees must report these transactions to HMRC by filing an annual tax return on-line via the HMRC reporting portal – something which not all companies appear to be aware of.
The deadline for reporting ERS transactions taking place in the 2020/21 tax year is 6 July 2021.
What are employment related securities?
The definition of ERS is intentionally broad in nature, and catches most transactions which involve an employee, director or someone connected with them, receiving securities in a business.
Although not an exhaustive list, the following examples are the more common transactions which must be reported to HMRC:
- An issue of shares
- The granting and exercise of options
- The exchanging of shares for new shares or loan notes
- The disposal of shares for more than their market value
Reporting an ERS scheme to HMRC
Where a company is party to a transaction caught by these rules, they will need to register a new ERS scheme with HMRC. After the scheme is registered, an ERS return will need to be filed for each tax year that the scheme remains active i.e. where HMRC are not informed that this should now be closed.
WHEN THE REPORTING DEADLINE OF 6 JULY IS MISSED, AUTOMATIC PENALTIES WILL BE ISSUED TO THE COMPNAY FOR LATE FILING.
Employers with active ERS schemes who have not been party to any reportable transactions within a given tax year must still submit a ‘nil’ return to HMRC via the portal. Failure to do so will also result in automatic penalties being issued to the company.
How can we help with your ERS return?
ERS reporting can be a complex area, with many companies failing to report notifiable transactions on a regular basis. For this reason, we would recommend seeking specialist advice to confirm whether a transaction may be caught under these rules.
Our specialist team can assist with both the registration of the scheme and the preparation of the ERS returns, ensuring that these are completed accurately and on time, and avoiding potential costly errors.
If this service is of interest to you, or you require any support with any other tax compliance, or reporting deadlines, please get in touch and we will be delighted to provide you with a quote.