As you may be aware, each year, a company is obliged to report to HMRC by 6 July information relating to its employment related securities, i.e., shares, securities and options in which employees and directors are interested.

The deadline for reporting for tax year 2022/23 (ending 5 April 2023) is midnight on 6 July 2023. If you operated an employee share scheme in the 2022/23 tax year, it is therefore time to consider your annual reporting obligations. This is the case whether it is a formal scheme such as EMI or CSOP – or an informal “unapproved” plan or merely one-off awards of shares or options.

You must detail all actions relating to Share Schemes which took place over the last 12 months, including:

• The grant and/or exercise of share options (but note that the grants of EMI options are reported separately as detailed below)
• Where EMI options have been exercised, cancelled or replaced
• Changes to the rights/restrictions attaching to securities
• Share or option cancellations
• Award of restricted stock units (if applicable)
• Acquisitions from employees for more than market value
• Any event/action which has changed the share value of a participant’s shareholding

Please note that even if no actions set out above took place, the company is still required to report this to HMRC by filing a nil return. There is also no ‘de minimis’, so even in circumstances where the securities have a negligible value, this will need to be reported.

The information required to be provided varies depending on what exactly is being reported. For an issue of shares or exercise of options, the following information will need to be provided:

• company issuing the shares and address details
• names and NI numbers of the employees
• number and type of shares awarded
• restrictions that could affect the market value of the shares
• whether the employee has made a ‘section 431’ election (so as to be taxed as though no restrictions on the shares apply)
• the market value of each share and amounts which employees have paid for the shares
• whether Income Tax and NIC were collected under PAYE

Importantly, should any return contain a material inaccuracy, then a penalty of up to £5,000 can arise.

If, therefore, you are unsure as to whether a particular event needs to be reported, please contact us as soon as possible so that we can provide advice.

Before you can make an annual return, your share plan must be registered with HMRC under the ERS online service, if it has not been done already.

If you operate such an employee share plan, an annual return will need to be filed online by 6 July 2023 in respect of all your share incentive arrangements, whether to not they were put in place with a formal set of plan rules. Please note that HMRC do not issue reminders and so the onus is on you to ensure that the filing deadline is adhered to.

HMRC has provided templates for uploading data on employee share plans. Whilst you can use your own worksheets, they must be in exactly the same format as HMRC’s templates. It is important to note that templates will be rejected if dates are incorrectly formatted. In particular, HMRC have flagged that empty lines in templates will mean that any data below the empty line will not be captured. Note that you will need the unique scheme reference number for the filing of the annual return.

Screenshot everything! Unlike other online services, the ERS HMRC account does not retain details of the submissions made.

Moreover, HMRC will not provide copies of prior years’ returns. Screenshots will save questions from the due diligence angle when your company is sold.

Importantly, please note that HMRC have made some changes to their online templates, which are summarised here: https://www.gov.uk/guidance/employment-related-securities-bulletin-47-january-2023#changes-to-the-employment-related-securities-ers-end-of-year-return-templates-from-6-april-2023. It is of vital importance that if you prepare your own versions of HMRC’s templates, that any amendments to HMRC’s templates are incorporated into your templates, as failure to do so may result in your return being rejected and incurring penalties for late filing.

Further information about registering your scheme and submitting annual returns can be found here: Tell HMRC about your employment related securities (ERS) schemes – GOV.UK (www.gov.uk) and Submit your employment related securities (ERS) return – GOV.UK (www.gov.uk).

For those operating an EMI scheme, it is important that you continue to notify HMRC within 92 days of the actual grant of any EMI options.

Please note that there is an intention to bring this obligation in line with the annual return deadline for EMI and other plans (as above) but this will only be effective as of 6 April 2024. As always, it is important to take a screen shot of the notification process for your internal records, should you need to produce evidence of having made such notification.