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Spotlight on… Employment Related Securities reporting

In this edition, Corporate Tax Partner Neil Insull looks at ‘Employment Related Securities’ (ERS) and the obligations you need to be aware of as an employer before the upcoming reporting deadline of 6 July 2022.

Why is it relevant?

There is an annual reporting requirement for companies that have awarded ERS, or the right to acquire such securities, to their UK-based employees and directors. ERS is widely defined and includes shares, stocks, share options, restricted stock units and any other interest in shares.

Employers have an obligation to inform HM Revenue & Customs (HMRC), enabling them to maintain, and potentially examine, records of employees who have been awarded shares or other securities by reason of their employment. Even if an employee has paid the full market value for the ERS, the transaction may still be reportable. As well as the acquisition of ERS, other so called ‘reportable events’, such as changes to the rights of shares, are likely to be within the scope of the reporting requirements.

Who is it relevant to?

Companies that have awarded ERS, or the right to acquire such securities, to their UK-based employees and directors, but also overseas employees and directors who have performed duties in the UK.

What do you need to know?

Online returns of reportable events in the 12 months to 5 April 2022, are required for each type of share plan operated by the company, including tax-advantaged plans, and is due by 6 July 2022. Reportable events include:

  • The grant and exercise of share options
  • The award of shares, restricted stock units and other securities
  • Changes to the rights of securities
  • Disposals at more than market value
  • Cancellation or lapses of share options

The return should be submitted and completed through HMRC’s online portal.  If you have not been required to submit returns previously, be aware that registering with the portal can be a lengthy process, so we would recommend getting in touch as soon as possible. If you have previously submitted returns, then you will need to submit a ‘nil’ return even if there were no reportable events this year.

Penalties will be levied by HMRC if a return is not filed by 6 July 2022.

What should you do next?

If you think you may have a reporting requirement, our team would be delighted to discuss this with you. We can also provide assistance with completing the forms and filing these with HMRC. Please contact Neil or Hugo using the details below to discuss your requirements.

Contact Neil

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