An Employment Related Security (‘ERS’) is a security (e.g. shares, share options) which is acquired as a result of an individual’s (or a connected person’s) prospective, current or previous employment or position as an office holder (company secretary or director).

Common examples of what needs to be reported?

There are many types of reportable event, but the most common reportable transactions are the issue of shares  to any directors/employees, the disposal of shares for more than market value, and the award, lapse, and exercise of share options, either unapproved or through an HMRC approved scheme like the Enterprise Management Incentive (EMI) scheme or Company Share Option Plan (CSOP).

What are your ERS reporting requirements?

Where a company has ERS reporting requirements or has been requested to complete a return by HMRC (through the ERS online service), the employer has an annual obligation to submit an ERS return by the submission deadline.  For the 2023/24 tax year the submission deadline for making the ERS return via HMRC’s online system was 6 July 2024.

For those of our clients for whom we have acted in the past in relation to ERS submissions, or for those clients where we were aware of reportable transactions in the tax year, we have been in contact prior to the deadline of 6th July. For everyone else, if you believe you have ERS reporting requirements, now is the time to act.

What penalties will be charged for late submission?

As the deadline of 6 July 2024 is past, we would anticipate that HMRC will start issuing ERS penalty notices to those employers who, for whatever reason, may have missed the filing deadline. 

For the 2023/24 tax year, the initial penalty for missing the filing deadline is £100. However, an additional penalty of £300 will become due if the ERS return is more than three months late with another £300 becoming due if the return remains outstanding after six months. If a return is still outstanding nine months after the due date, daily penalties of £10 a day may be charged.

Where a company’s return contains a material inaccuracy, that is careless or deliberate, and this is not corrected, this can result in penalties of up to £5,000.

How we can help?

If you have received an ERS penalty notice from HMRC, or you believe that you should have submitted an ERS annual return due to a transaction during the tax year, we can assist you with making the submission to HMRC.

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 reportable event in the year, HMRC will still expect a NIL return where a scheme has been set up. We can also provide advice as to how to close down a scheme if so desired.

We are keen to help companies avoid penalties and if you are in this position, we would ask that you get in touch as soon as possible to avoid the penalties increasing.

Should you wish to discuss this further with a member of the Entrepreneurial Taxes team at Johnston Carmichael please don’t hesitate to contact us at entrepreneurialtaxesjc@jcca.co.uk.