If you operate a share plan or there has been any type of equity transaction involving UK employees or directors you will almost certainly have to submit a return to HMRC by 6 July to report transactions in Employment Related Securities (ERS), also known as Share Plan Reporting. The annual Share Plan Reporting requirement applies to both private and listed companies. Where plans are operated by UK parent companies, the UK parent or a UK employing company should report. Where plans are operated by overseas parent companies, then the UK employing company should report.
Reportable transactions range from formal share plan activity to activity outside formal share plans, such as the acquisition of loan notes, gift of shares and disposals of shares for more than market value. HMRC is increasingly looking at the correlation between payroll, corporation tax deductions and share plan reporting.
Download our guide to Share Plan Reporting which summarises the way employee or director share activity must be registered and reported in the UK.
Below, we look at this further and explore the following
- When is the Share Plan Reporting deadline?
- What are the penalties for a late return?
- How we can help you with Share Plan Reporting
- Looking at implementing a share plan?
When is the Share Plan Reporting deadline?
Reportable transactions for each tax year should be included in the ERS return for that year which must be submitted by 6 July following the end of that tax year. The window for Share Plan Reporting opens on 6 April for companies to report any share plan activity in the prior tax year. Companies can file their ‘ERS’ return via their PAYE for Employer’s account on the Government Gateway.
As of 6 April 2023, for all ERS returns submitted, additional information became mandatory including confirmation of whether PAYE was operated in relation to certain reportable events, PAYE reference numbers and individual national insurance numbers.
What are the penalties for a late return?
Penalties increase over time with an initial £100 penalty arising for missing the 6 July deadline, a further £300 penalty arising on 6 October and a further £300 arising on 6 January if the ERS return is still outstanding. Daily penalties can then be applied from 6 April or 9 months after the deadline however we have never seen these applied in practice. The biggest risk for late returns is the additional attention from HMRC. We are seeing increasing levels of ERS compliance checks. Don’t take the risk of submitting your return late – now is the time to get prepared. Latest HMRC figures show that over one third of returns were submitted late.
Between 6 April and 6 July each tax year, HMRC’s online portal can crash intermittently and historically the worst crashes have been in the run up to the filing deadline. This can make it difficult for companies to meet the ERS reporting deadline if they leave it to the last days / weeks in the run up to the deadline. Companies who leave their filings too close to the 6 July deadline may also find that their return is rejected for missing data, and they need to collate additional information. HMRC now require more mandatory information and there is additional scrutiny of the ERS data. There is a risk of incurring penalties if returns are not submitted on time by 6 July however more substantial penalties can arise for incorrect reporting.
How we can help you with Share Plan Reporting
Businesses should look at their reporting process when the window for share plan reporting opens on 6 April. In This way, you will have plenty of time within the three-month window to review and submit your ERS returns to HMRC.
Late returns trigger automatic penalties and late certification for tax advantaged share plans can be even more costly as this can cause the tax advantages of certain awards to be lost. We can help with all aspects of your reporting so that you are fully compliant. Our Share Plan Reporting services include:
- Helping you assess if a share plan return must be filed
- Identifying all share scheme reporting obligations
- Assistance with registering plans with HMRC online
- Becoming your ERS agents so that we can complete and submit the share plan returns
- Assisting with historic reporting to ensure your records are up to date, to put a stop to further penalties.
We recommend employers start the annual return process as early as possible. You will need time to identify all reportable events, such as where share options have been granted / exercised or restricted stock units have been granted / vested. You should also allow time to identify and resolve any problems that arise.
Share Plan Reporting – are you meeting all your share plan reporting obligations?
In the video Victoria Bright explains what share plan reporting obligations exist in the UK, risks for late returns and ways BDO can help.
Ahead of the deadline on 6 July, we share some top tips to help you prepare:
Start early! This is key if you need to set up access to the relevant online portal (on the Company’s Government Gateway) or need to register any new plans.
Collate all your data in one place to avoid missing any reportable activity. Remember the changes last year mean NI numbers and PAYE references (along with other details) are required which may mean collating extra data.
Don’t forget to consider international mobile employees. If an employee has left the UK, there could still be a reporting requirement for the individual and their reporting is often missed.
There are many parts of the ‘Other’ return that require a number (which denotes a specific meaning) to be entered which you can only determine by reference to other documents, such as type of restrictions applying to the shares.
Remember if your business is listed on the AIM market – the shares are not considered ‘listed’ for the purposes of reporting such that transactions on the open market may be reportable.
Remember that the formatting is very precise on the HMRC returns so be sure to check this.
Remember to submit nil returns for all open plans where there was no activity in the year.
Save confirmation of submission receipts for all returns along with a copy of the final return submitted – HMRC will not provide you with copies of submitted returns.
If your plans have closed, they will need to be officially closed through the Company’s Government Gateway, this is often missed on transactions.
Avoid penalties by submitting before the 6 July deadline and make sure your returns are correct.
Download our guide
Looking at implementing a share plan?
