Employment-Related Securities (ERS) Reporting

If your business has issued shares, options, or other types of securities to employees or directors, you are likely to have an obligation to submit an Employment-Related Securities (ERS) return to HMRC. The reporting deadline is 6 July following the end of each tax year in which any reportable event(s) occurred so it’s essential to understand your responsibilities to avoid penalties.

What Are Employment-Related Securities?

Employment-Related Securities are shares or securities, including share options and restricted stock units, provided to employees or directors as part of their remuneration or as incentives. The “employment-related” element means the securities are granted because of the individual’s employment or directorship.

ERS can be delivered through tax-advantaged schemes, such as:

• Share Incentive Plans (SIPs) — Employees can receive free shares, buy partnership shares, and acquire shares from dividends with potential tax exemptions after holding periods.

• Save As You Earn (SAYE) — Allows employees to save monthly and use the funds to purchase shares at a fixed price, with interest, bonuses, and share gains potentially exempt from Income Tax and National Insurance.

• Company Share Option Plans (CSOPs) — Offers employees the right to buy shares at a set price, usually tax-free if exercised within specified time limits.

• Enterprise Management Incentives (EMIs) — Available to smaller businesses, providing share options up to £250,000 over three years without Income Tax or National Insurance on shares bought at market value.

  
  

All ERS schemes, whether tax-advantaged or not, must be reported to HMRC. The choice of scheme should reflect your business objectives and how you wish to incentivise your employees.

Why ERS Reporting Is Relevant

There is an annual reporting requirement for companies that have awarded ERS or the right to acquire such securities to UK-based employees and directors, and in some cases, overseas employees who have performed duties in the UK.

Even if an employee has paid full market value for the securities, the transaction may still be reportable. Reportable events include:

• Granting and exercising share options

• Awarding shares, restricted stock units, or other securities

• Changes to the rights attached to securities

• Disposals at more than market value

• Cancellation or lapses of share options

  
  

Submitting these returns helps HMRC maintain accurate records and enables them to verify that correct tax treatment has been applied.

Who Needs to Report?

ERS reporting is relevant to all companies that:

• Offer equity-based incentives through formal share schemes

• Make one-off employment-related share awards

• Operate in both the private and public sectors, including start-ups

  
  

The rules ensure that even smaller or non-listed businesses comply with HMRC’s transparency requirements.

Registering and Filing Returns

Before filing, all relevant share schemes must be registered with HMRC through the PAYE online portal. Once registered, an annual return is due, even if there were no reportable events (a “nil” return).

For the 2025/26 tax year, returns must be submitted by 6 July 2026. Late or inaccurate returns carry penalties:

• £100 if the deadline is missed

• £300 if outstanding after three months

• £300 additional if outstanding after six months

• Daily penalties of £10 may apply if outstanding after 9 months

• Fines for inaccurate returns can be up to £5,000 per return

  
  

It’s important to allow extra time for registration if you haven’t submitted ERS returns previously, as the process can take longer than expected.

Why Compliance Matters

Aside from avoiding penalties, ERS reporting demonstrates that your business has a strong understanding of tax, compliance, and employment obligations. Accurate reporting also:

• Maintains transparency around employee incentives

• Supports good corporate governance

• Reinforces credibility with investors, potential buyers, and HMRC

  
  

Whether you operate a large company or a small start-up, understanding and meeting your ERS reporting obligations is essential.

Speak to an Expert

Navigating ERS reporting can be complex, particularly if your business operates multiple schemes or has issued awards to overseas employees. Speak to us to ensure:

• All reportable events are captured

• Returns are submitted on time and accurately

• Penalties are avoided and compliance obligations are met

  
  

Getting professional advice now can save time and costs later. Don’t wait until the deadline — expert guidance ensures your business stays compliant and confident.

Authored by: London Team