An Employment Related Securities (ERS) annual report should be filed by 6 July following the tax year in which an event occurs. For the 2020/21 tax year, the corresponding ERS annual return is due to be submitted by 6 July 2021.

ERS returns are accessed through the same online portal as a Company would use for payroll filings. Within this account, a Company can register a relevant share scheme, and the team at Johnston Carmichael can provide detailed instructions if required, however we cannot set up a scheme for a Company. All ERS returns are submitted to HMRC electronically, via this online portal. We can submit a return on a Company’s behalf where we have agent access, and where we don’t have that and given ongoing COVID-19 restrictions (agent access requires a code to be sent to the Company’s office address which may not be able to be accessed right now), we can talk a Company through the process on the phone.

What is required to be reported?

The table below details some examples of what may/may not require to be reported. This is not an exhaustive list.

May not require to be reportedMay require to be reported
Newly incorporated companies - allocation of initial subscriber shares.Acquisition of securities (including shares) acquired by reason of the individual’s employment or by reason of the employment of another person. Any amendments to these shares/securities thereafter.
Newly incorporated companies - allotment of further shares.Any event relating to an HMRC approved scheme such as a CSOP, EMI or SIP.
Newly incorporated companies - shares acquired directly from the formation agents.Any situation when a s431 election has been signed – this automatically means that a report should be made, even if the election is made on a “protective” basis.
Transfer of shares in the normal course of domestic, family or personal relationships.Doing anything that artificially enhances the market value of a security or disposing of a security for more than market value.

We have developed three example case studies which will help illustrate these rules in practice.

Case study 1

Plant Hire Ltd was formed in April 2008 by two individuals, Mr Black and Mrs Hewitt who have subscribed for fifty shares each. Both appointed as directors of the Company on the date of incorporation. No ERS report was required as they were initial subscriber shares.

In April 2019, Mrs Hewitt gifted 90% of her shareholding to her son, Mr Hewitt, who is employed in the Company. She has gifted Mr Hewitt the shares as part of her handover of the Company to the next generation and as she takes a step back.

On the basis that this gift of shares is in the normal course of domestic, family and personal relationship, and is not connected to Mr Hewitt’s employment (although he is an employee), the facts and circumstances should be documented at the time (perhaps via Board Minute) and no ERS annual return will be required.

Case study 2

The facts of the above are the same. In September 2019 operations have ramped up significantly and the Company has hired a new Operations Manager, Mr Simpson, and a new Finance Director, Miss Cooper who is to start on 1 January 2020.

The Company views these two appointments as integral to the success of the business and the Company has allotted five new shares in an attempt to retain these two key individuals in the long term.

An ERS report for the 2019/20 tax year is required for the share allotment to both Mr Simpson and Miss Cooper, as the shares have been issued to them by virtue of their employment with Plant Hire Limited.

Case study 3

The facts of the above two case studies are the same. In April 2020, the Company setup an Enterprise Management Incentive (EMI) share option scheme and granted options to five key employees under an HMRC agreed valuation.

An EMI notification is required to be submitted to HMRC within 92 days of the date of any EMI option grant. The EMI notification discloses to HMRC the options that have been granted. Thereafter, an annual return must be submitted by 6th July each year thereafter. Changes to be reported include options lapsing/options being exercised/options being amended.

How we can help

We can confirm if your Company has a reporting obligation and help you to complete the registration process. Once set up, we can also help with the preparation and submission of the annual ERS returns. Even if there has been no event in the year, HMRC will still expect a NIL return where a scheme has been set up. We can also help you close down a scheme if so desired.

If you have any questions on this, please do not hesitate to contact Stephen Oates.