Companies that award shares, options, or other securities to UK employees, directors, or officeholders need to be aware of the 6 July deadline to submit an employment related securities (ERS) annual return to HM Revenue & Customs (HMRC). The requirement covers any form of equity incentive, such as restricted or unrestricted shares, growth shares, share options. and other forms of share awards and securities. There are separate returns for the tax-advantaged employee share schemes, i.e., Enterprise Management Incentives (EMI), Company Share Option Plan (CSOP), Save As You Earn (SAYE), and Share Incentive Plan (SIP), and one for all other arrangements (e.g., non-tax-advantaged options or the direct issue of shares to employees or directors).
Filings are not necessary for share awards made to non-employees or non-directors in the UK, such as consultants or contractors, when the awards are not in connection with a past or future employment/directorship or to employees outside the UK who had no UK duties throughout the relevant period. Awards made to Employer of Record employees need to be reported, usually by the Employer of Record employer.
Companies should be aware:
- Even one-off share awards, such as the grant of restricted shares to a director, are considered “schemes” and need to be registered with HMRC online (via the Pay As You Earn portal); the returns are not limited to formal schemes, and one-off share acquisitions by employees or directors must still be reported as part of an “other” arrangement.
- If a company has not yet registered an ERS scheme with HMRC, it should do so immediately to allow time to submit an annual return by 6 July, as it can take up to two weeks for the scheme to become “active” in HMRC’s portal.
- A company will also need to self-certify that tax-advantaged share plans, including EMI and CSOP, meet certain requirements.
- If a CSOP is not registered with HMRC in time, options granted under that CSOP will not benefit from tax-advantaged status.
- It is very important to take screenshots or print copies of every page of the HMRC end-of-year reporting process as well as other activity on HMRC online, particularly the notification of EMI option grants, and it is very important to keep these screenshots with the company’s records. A company should also screenshot or make note of the acknowledgement number received once the return is filed.
- HMRC does not send any reminders or notices to file in respect of these ERS annual returns.
- Companies can register for HMRC’s online services at gov.uk/log-in-register-hmrc-online-services. The returns, along with HMRC guidance on what needs to be reported, can be found at gov.uk/government/collections/employment-related-securities-detailed-information.
If no activity has occurred, companies must still file a “nil” return for each of their registered schemes. Failure to file accurate returns by 6 July may result in HMRC imposing penalties. There is an automatic penalty of £100 for a late return, with additional increasing penalties if the return remains outstanding for more than three months (£300 after three months, a further £300 after six months, and £10 per day after nine months). In addition, if the return contains inaccuracies, HMRC can impose penalties of up to £5,000 per return.
Please also note, if a company operates an EMI option scheme, the deadline to notify HMRC of the grant of any EMI option is 6 July following the end of the tax year in which the option was granted. Accordingly, any EMI option granted during the current tax year (6 April 2025–5 April 2026) must be notified to HMRC by 6 July 2026. It is important that any EMI notification is made by the deadline to ensure that the EMI option remains EMI qualifying.
If a company has UK employees or directors who have been issued shares or granted options, it should consider whether any action needs to be taken in respect of this upcoming HMRC filing deadline.
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