12 May 2022
All employers operating in the UK must submit an employment related securities (ERS) return to HM Revenue & Customs (HMRC) by 6 July following the end of the tax year. The deadline for filing the ERS return for the 2021/22 tax year, which ended on 5 April 2022, is Wednesday 6 July 2022. As the registration and reporting process can take some time, we recommend that employers prepare and file their return with HMRC as soon as possible.
What do I need to do?
Register any new plan or arrangements well in advance of the filing deadline
- Before you can submit your ERS return, all relevant share plans must have been registered online with HMRC via the registration services found here. To do this, you will need a Government Gateway user ID and password. Your UK payroll will typically have these details.
- You do not need to register each non-tax advantaged plan or arrangement separately. A single registration (and return) covering all existing non-tax advantaged plans will be sufficient. Please note, however, that all UK tax-advantaged plans must be registered separately with separate returns filed.
- UK tax-advantaged Share Incentive Plans (SIPs), Save As You Earn plans (SAYE plans) and Company Share Option Plans (CSOPs) must also be ‘self-certified’ online as being compliant with applicable UK tax legislation.
- If your plan has been registered and self-certified (if relevant) previously, you will not need to register it again. Registration will only be required for new plans implemented during the 2021/22 tax year. You should be provided with a unique scheme reference number for the plan within 7 days of registration.
File the ERS return – including any nil returns
- Once you have the unique scheme reference number for your plan, you will be able to file the ERS return.
- To file the return, you must complete the relevant online template located on the UK Government website here.
- Each template asks for prescribed information in connection with relevant ‘reportable events’.
- The template that you must use will depend on the plan that you are completing the return for. Plans that are not UK tax-advantaged plans will use the “other ERS schemes and arrangements” template and there are specific templates for each of the UK tax-advantaged plans.
- Once you have completed the template, you can run it through a formatting check and then submit the return here.
Key points to look out for
- Net-settled awards: HMRC has issued specific guidance on the reporting of net-settled awards (see ERS Bulletin 33). You may need to check processes carefully to determine whether tax on awards is funded by net-settlement or a “sell to cover” arrangement, and then organise reporting accordingly.
- Mobile employees: make sure you capture all of your plan participants who have been in the UK at any relevant time and have any UK income tax position in relation to their awards.
- Transactions: make sure the relevant entities are reporting share award activity related to any corporate transaction and, if your group has acquired a business or company, make sure any share awards in that entity are included in reporting where appropriate.
- No plan activity: where you have registered a plan, you must continue to file a return even where there has been no plan activity in the relevant tax year. In these circumstances, a ‘nil return’ should be filed.
- Outages: in previous years, the website where the return is submitted has experienced outages. The web page that is found here will notify users of any current and planned issues or outages.
- Terminated plans: if you no longer use a share plan, you will still need to make an annual return for outstanding awards. Once all awards have been settled, you can stop filing but only after you have informed HMRC that the plan has terminated. Further information on this is available here.
- Templates: we recommend that you always download the most recent templates from here rather than using previously downloaded templates (note file names still have “2015-16” in the title). The templates are format sensitive and so generally no changes should be made. The checking service found here allows companies to check for formatting errors prior to filing the completed templates. We recommend using this service to as it is very helpful in pinpointing particular formatting issues so these can be corrected before any attempt to submit the templates.
- EMI plans: there are different (and more onerous) requirements and deadlines for UK tax-advantaged Enterprise Management Incentive (EMI) option plans. Please get in touch if you operate, or are intending to operate, an EMI plan.
Why is it important to register and file accurate returns on time?
Failure to register and/or file the return on time can have serious consequences:
- Financial penalties may be applied for returns which are materially inaccurate (potentially including both careless as well as deliberate errors).
- Financial penalties automatically apply if you fail to correctly file your ERS returns by the 6 July deadline, even if no reportable events occurred in the tax year.
- Newly adopted UK tax-advantaged plans will lose their tax-advantaged status if you fail to register and self-certify them by the deadline where awards have been granted in the 2021/22 tax year. This means that any awards granted under new SIPs, SAYE plans and CSOPs on or after 6 April 2021 would not be tax-advantaged.
For some companies, the online ERS return process is now an established part of the annual cycle of share plans activity. Whether or not you are new to the process, the message remains to plan ahead and give plenty of time for gathering data in the correct format and checking the content.
Recent guidance on, for example, reporting of net-settled awards, seems to indicate that HMRC will be looking at areas of alignment between the ERS returns and other elements of a company’s tax affairs (net settlement can in some cases impact the corporation tax treatment for example). We would therefore recommend that those managing the share plan return process should ensure data is aligned with that being used by other parts of the business.
The layout of the returns is inflexible and whilst the error checking service is very helpful in identifying pure formatting errors, there is no facility to include explanation of how awards have been reported in any cases which may be unclear. In these circumstances, we recommend companies keep a note of the approach they have taken and why, to support responses to any enquiries from HMRC in future.
If you have not yet done so, take time to ensure your plans are registered and that you are familiar with the requirements of the return(s) you need to file so that you can meet the 6 July deadline.
If you have any questions, please do contact us and we would be happy to help.
Suzannah Crookes and Paul Abthorpe