Employee share reporting – are you affected?

Lubbock Fine, 23 May 2019

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If your company issued new shares, options or warrants over the last year or so, you should think about whether the company has ‘employment related securities’ (“ERS”) and is thus required to report to HMRC by 6 July 2019. 

Any employer who makes share-based payments to employees needs to file a return, as this is how HMRC gets the information they need to raise employee tax assessments.  Employee share awards require disclosure, but so too do grants, lapses and exercises of options or rights to acquire shares and other securities. Both tax advantaged and non-tax advantaged schemes must be reported.

Some situations are obvious – a gift of shares to employees as part of a remuneration package for example – but others are less so. Company founders might think that their holdings stem from their original investment, but where the shares or rights are made available by the employing company, the rules treat that as an acquisition by reason of employment. This can mean issues to or transactions by directors, company officials and non-execs are within the regime, even if those people set up the company.

There are limited exceptions providing carve-outs for new companies and transfers arising primarily from personal or family relationships rather than employment. However, the scope is deliberately set wide to maximise the information capture.

Employers need to register ‘schemes’ using the Government’s online ERS system.  Once the scheme is registered with HMRC, you use the same system to submit an end of year ERS return. It requires uploads in a specific format, and so the process can be fiddly, but templates are available in the ERS section of the government website.

HMRC imposes fines for failure to submit ERS returns before the deadline and so it is worth taking the time to compile the information in the right format and get it submitted by 6 July. Once a scheme is set up, positive action is needed to close it and escape the reporting requirements. So, even if nothing has happened in the tax year, a nil return will be required to avoid penalties.

At Lubbock Fine, we have been preparing and submitting these online returns for our clients since the system was introduced several years ago, and so we have dealt with a wide range of schemes and are set up to cope. If you’d like us to cope with your online ERS returns too, please contact Clare Munro at claremunro@lubbockfine.co.uk