The UK’s Employment Related Securities (ERS) tax return is a crucial component of tax compliance for businesses that issue shares or share options to their employees. Navigating the complexities of ERS reporting can be challenging, but understanding the requirements and filing the returns accurately is essential to avoid penalties from HMRC.
In this article, we’ll discuss what the ERS tax return is, its significance, and the key information businesses need to know in order to file it correctly and stay compliant with the regulations.
What is the ERS Tax Return?
The ERS tax return is an annual filing requirement for businesses that offer employees share options or shares. It helps HMRC assess the profits arising from employee share schemes and track payments of liabilities such as income tax and national insurance contributions.
The tax return must be filed by the 6th of July following the end of an accounting or tax year.
What Information is Required?
When filing the ERS tax return, companies will need to provide details about their employee share schemes and the associated tax liabilities, such as income tax and national insurance contributions (NICs). This includes information on:
- the number of shares issued
- when they were issued or exercised
- what type of scheme they are being used in
- who is eligible to participate.
In addition, companies will need to provide details of the amount of any tax due on the shares or options.
Where Some Companies Go Wrong
The most common mistake companies make on their ERS tax returns is misunderstanding the reporting requirements. Many miss relevant share-related transactions or events as they assume they are exempt. This can include share grants, options exercised, and other share-related awards provided to employees.
Of course, there are tax-advantaged share schemes that are exempt from ERS tax return reporting, including Enterprise Management Incentives (EMI), share incentive plans (SIPs), Save As You Earn (SAYE) schemes and Company Share Option Plans (CSOP). However, in any case, these must still be registered with the HMRC. Exempt or not, reporting ensures that the HMRC has the right information and that you cannot be found to be withholding.
To avoid making mistakes — for which you can be penalised — it is crucial that you familiarise yourself with the ERS tax return rules and ensure all required information is reported accurately and in a timely manner. The MGroup’s team of UK tax experts can help. Whether you want to outsource the task entirely or want external support to bring your internal staff up to speed, we have decades of ERS tax expertise to get you the right results. Contact us today.