Employment related securities reporting

Employment related securities (ERS) reporting is a crucial aspect of annual compliance for firms that offer securities or other share-based incentives to their employees.

These schemes can be a key retention and reward strategy for staff members, whether they are inside or outside a tax approved scheme. This is also an area where we are increasingly seeing compliance issues arising for firms, due to a lack of awareness around the reporting obligations that may apply.

In this article, we’ll guide you through what ERS reporting entails, when it may apply, and how to ensure your business remains compliant. As always, if you have any queries or would like support on your ERS reporting then please reach out.

What is ERS reporting?

ERS reporting involves the submission of annual returns to HMRC for any securities provided to employees as part of their employment. These securities can include shares, debentures, loan stock, and other financial instruments.

The purpose of ERS reporting is to ensure that any tax liabilities arising from these securities are correctly reported and paid as they are issued.

Once you have registered a scheme, you will need to file an ERS return every year, even if no transfers or transactions have taken place in that year. The annual ERS submission is due on 6 July following the end of the personal tax year eg 6 July 2025 for the tax year 2024-25.

When does ERS reporting apply?

ERS reporting applies in several scenarios, including:

Issuance of shares or securities

When a company issues shares or other securities to employees, it must report these transactions to HMRC. This includes both tax-advantaged schemes (such as Save As You Earn (SAYE) plans) and non-tax-advantaged schemes.

Grant or exercise of share options

If the employees are either granted share options, or subsequently exercise those options, the company must report this event. This is particularly relevant for schemes like Company Share Option Plans (CSOP) and Enterprise Management Incentive (EMI) schemes, as well as conventional unapproved share options. For EMI schemes there is also an annual return required for each year the scheme is in place, even if there is no activity.

Transfer of securities

Any transfer of securities or shares to employees, whether as part of a bonus or incentive plan, must be reported. This ensures that any potential tax liabilities are captured.

Disposal of securities

When employees dispose of securities for more than market value, such as selling shares, the company must report this to HMRC.

How to report ERS events

Registering the scheme

Before you can report any ERS events, you must register your ERS scheme with HMRC. This involves providing details about the scheme and obtaining a scheme reference number. The deadline for registering a scheme is 6 July following the end of the tax year, again 6 July 2025 for the personal tax year 2024-25.

Submitting annual returns

Each year, by 6 July following the end of the tax year, you must submit an annual return for your ERS scheme. This includes reporting all relevant transactions, even if there have been no reportable events (a nil return) in a tax year.

Using HMRC online services

Returns must be submitted through HMRC’s online services. Employers need to ensure they have the necessary Government Gateway credentials to access these services.

Why is ERS reporting important?

ERS reporting is essential for maintaining compliance with relevant tax legislation. Failure to report accurately and on time can result in penalties arising. Moreover, proper reporting ensures transparency and helps avoid potential disputes with HMRC or unexpected tax liabilities for your business or your employees in the future.

This is a key area of focus in due diligence for potential business disposals and is often the first area looked at by the buyer’s accountants. It’s very common for the buyer to require missing returns to be filed prior a deal taking place and even if penalties are relatively small in the context of the deal it gives a “bad first impression” during the due diligence process and can lead to enhanced due diligence procedures being required by the buyer.

How we can help

ERS reporting is a vital part of managing employee incentives and ensuring tax compliance. By understanding when and how to report ERS events, businesses can avoid penalties and maintain good standing with HMRC.

If you need assistance with ERS reporting, our team of experts is here to help. In addition, if you would like advice in relation to potential share schemes to reward your employees then we can help.

For further information, please get in touch with Tom Alun-Jones.