What is an Employment Related Securities (ERS) return?
An ERS return is an annual online filing that employers must complete and submit to HMRC before the annual deadline. ERS returns are required for Enterprise Management Incentives, Company Share Option Plans, Pay As You Earn schemes, Share Incentive Plans, and unapproved options.
TIP: make sure you have registered your scheme with HMRC before you submit an ERS return. We would advise registering with HMRC as soon as the scheme or arrangement has been created. This can be done on the HMRC ERS online portal.
How do I submit the return?
To submit an ERS return, you need to sign into your Government Gateway account that was created when the share scheme was registered with HMRC. Once signed in, you go to ‘View schemes and arrangements’, select the relevant scheme and click ‘Submit annual returns’ for the relevant tax year.
TIP: Once you have filled in all the relevant information and completed the return, it is important to save of copy of the return template before you submit it. This can be used as evidence to HMRC that the return has been submitted should any issues arise.
TIP: Make sure to use the HMRC Open Document Spreadsheet (.ods) template provided when submitting the return. A PDF document or other format will not be accepted and can result in the return being rejected.
TIP: Use the HMRC return checker, which is available on the government website, to check your files for formatting errors before they are submitted. This will help ensure your return is not rejected.
When do I need to submit a return?
As mentioned above, if you are an employer that is operating an ERS scheme including ones where directors or employees have acquired shares other than through an employee share scheme, you will likely need to submit a return every year. This is required for every scheme in place, including one-off awards.
TIP: When there have been no transactions, activity or, in the case of EMIs and CSOPs, there are no outstanding qualifying options, a nil return must be submitted. This is a return which simply states that there is nothing to declare.
TIP: If a scheme is no longer in operation, but is not marked as “ceased”, HMRC will still expect an ERS return to be submitted. Make sure to log onto the online portal and cease any scheme which is not being used. You will still require an annual return for the tax year that the scheme is ceased.
What happens if I miss the deadline?
There are several penalties which you can incur if you miss the ERS return deadline. There is a £100 penalty which is automatically issued if you do not submit the return by 6 July. A £300 penalty will be issued if the return is not completed 3 months after the deadline (6 October), and there is a further £300 penalty if it still has not been submitted 6 months after the deadline (6 January). Further daily penalties can apply thereafter.
TIP: We would recommend you complete your ERS return before the day of the deadline to ensure you have enough time should any complications arise in the submitting process. It is beneficial to set calendar reminders and start gathering data for your ERS return ahead of time.
How can Shepherd and Wedderburn help?
Our experienced share plan team can help you throughout the ERS return process. We can identify if your business requires to complete a return, provide guidance on the procedure itself and, if required, function as an agent and submit the relevant returns on your behalf.
If you require assistance with your ERS reporting, please do not hesitate to contact our experienced team of share plan practitioners who can talk you through the process and help get your ERS returns submitted on time.
This article was co-authored by Trainee Taylor Foster.