Countdown to Employment Related Security Reporting

26 April 2018

The 6th of July 2018 is an important deadline for various taxes, especially Employment Related Security (“ERS”) reporting. 

The definition of what constitutes an ERS is widely drawn, and includes any security where the right or opportunity to acquire the security (or an interest in a security) is:

  1. made available by reason of the employment of the individual acquiring the securities (or interest in the security) or any other individual, or
  2. made available by an individual's employer. Where a person connected with an individual’s employer makes an interest available, it will be regarded for ERS as being made available by reason of an employment relationship and fall within ERS legislation.

Companies have an obligation each tax year to report to H M Revenue & Customs (“HMRC”) through an online ERS Return certain transactions their employees are involved in relating to shares, securities or options over shares.

Additionally, companies with Enterprise Management Incentive Plans (“EMI”), Share Incentive Plans (“SIP”), Save As You Earn (“SAYE”) and Company Share Option Plans (“CSOP”) are required to self-certify that the schemes meet the legislative requirements and complete an online declaration even where no reportable events have occurred in the year to 5 April 2018.

As a brief reminder, reportable events for a company include:

  1. Any new share plan arrangements, including EMI, CSOP, SIP and SAYE.
  2. Any grant or exercise of share options.
  3. Any issue, acquisition, assignment or release of securities by employees or directors.

Reportable events for the year ended 5 April 2018 must be reported to HMRC by 6 July 2018.

It is important to remember that reportable ERS events apply to current employees and directors, together with past or prospective employees or directors. Additionally, we recommend advice is taken on obligations around reportable events where there is a disposal by an employee of an ERS at more or less than market value.

There are some limited exemptions to ERS reporting and it is advisable to discuss this with your professional advisor as HMRC have a narrow interpretation of these exemptions. 

In a recent post, HMRC reported that out of the 25,000 share schemes registered, 7,100 filed returns late in 2016/17 and were issued a flat £100 penalty notice. As HMRC do not send reminders to file ERS returns it can be easy to get caught out.

For any clients who have previously not filed ERS returns online, the registration process with HMRC can take up to 28 days therefore, it is important to complete this process early to avoid a late submission penalty.

If you require support in this area, please contact Frazer Nicol (frazer.nicol@aab.uk) or your usual AAB contact.

To find out more about AAB’s E2 Team, please click here.

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