Share plan reporting

Share Plan Reporting

If your business operates a share plan or there has been any type of equity transaction involving your UK employees or directors, you will probably need to submit a return to HMRC by 6 July to report transactions in Employment Related Securities (ERS) – this is also known as Share Plan Reporting.

HMRC is increasingly looking at the correlation between payroll, corporation tax deductions and share plan reporting. Annual share plan reporting applies to both private and listed companies. If your plans are operated by UK parent companies, the UK parent or a UK employing company should report. If your plans are operated by overseas parent companies, then the UK employing company should report.

Reportable transactions range from formal share plan activity to activity like the acquisition of loan notes, gift of shares and disposals of shares for more than market value.

Where the business operates an enterprise management incentive (EMI) plan and has granted EMI options in the tax year, then the grant of EMI options must be notified to HMRC by 6 July as well however it is important to note that EMI grants are notified via a separate notification process than other end of year reportable events. Where EMI options are notified late, the qualifying status of the EMI options is lost. Read more about EMI.

When is the Share Plan Reporting deadline?

Reportable transactions for each tax year should be included in your ERS return for that year, which must be submitted by 6 July following the end of the tax year. The window for share plan reporting opens on 6 April for companies to report any share plan activity in the prior tax year. Companies can file their ERS return via their PAYE for Employer's account on the Government Gateway.

For all ERS returns, you must provide additional information, including confirmation of whether PAYE was operated in relation to certain reportable events, PAYE reference numbers and individual national insurance numbers.

As noted above, there are particularities with EMI in that EMI option grants are notified using a slightly different submission process from other EMI events, such as exercises or lapses, which are in the end of year EMI return annual return in the normal way.

If you're struggling to know what to report, get in touch with our team of share plans experts, who will be happy to discuss your situation.

What are the penalties for a late return?

Penalties for late ERS returns increase over time. An initial £100 penalty arises for missing the 6 July deadline; an additional £300 penalty arises on 6 October, and a further £300 on 6 January if your ERS return is still outstanding. Daily £10 penalties can then be applied from 9 months after the deadline - but we have never seen these applied in practice.

The biggest risk for late returns is the additional attention from HMRC. We are seeing increasing levels of ERS compliance checks - don't take the risk of submitting your return late.

Between 6 April and 6 July each tax year, HMRC’s online portal can crash intermittently, and historically the worst crashes have been in the run up to the filing deadline. This can make it difficult to meet your ERS reporting deadline if you leave it to the last few days before the deadline.

If you leave your filings too close to the 6 July deadline, you may also find that your return is rejected for missing data, and you need to collate additional information. HMRC now require more mandatory information and there is additional scrutiny of the ERS data. Despite the risk of incurring penalties if your returns are not submitted on time by 6 July, more substantial penalties can arise for incorrect reporting.

Top tips for preparing your share plan reports

Start early! This is key if you need to set up access to the relevant online portal (on the Company’s Government Gateway) or need to register any new plans
Collate all your data in one place to avoid missing any reportable activity. Remember you will need NI numbers and PAYE references (along with other details), which may mean collating extra data
Don't forget to consider international mobile employees. If an employee has left the UK, there could still be a reporting requirement and their reporting is often missed
There are many parts of the 'Other' return that require you to reference other documents, such as the type of restrictions applying to the shares
Remember if your business is listed on the AIM market – the shares are not considered 'listed' for the purposes of reporting, so transactions on the open market may be reportable
Remember that the formatting is very precise on the HMRC returns, so be sure to check this
Submit nil returns for all open plans where there was no activity in the year
Save confirmation of submission receipts for all returns along with a copy of the final return submitted – HMRC will not provide you with copies of submitted returns
If your plans have closed, they will need to be officially closed through the Company's Government Gateway - this is often missed on transactions
Be aware that the reporting of EMI options is different to the reporting of other share plans – do speak to a share plans expert if you have questions
Avoid penalties by submitting before the 6 July deadline and make sure your returns are correct.

How we can help

You should look at your reporting process when the window for share plan reporting opens on 6 April. This way, you will have plenty of time within the three-month window to review and submit your ERS returns to HMRC.

Late returns trigger automatic penalties and late certification for tax-advantaged share plans can be even more costly because the tax advantages of certain awards can be lost. We can help with all aspects of your reporting to make sure your business is fully compliant. We can help you to:

Assess if you need to file a share plan return
Identify all of your share scheme reporting obligations
Register your plans with HMRC online
Submit your share plan returns as your ERS agents
Assist with historic reporting to ensure your records are up to date, to put a stop to further penalties.

We recommend employers start the annual return process as early as possible. You will need time to identify all reportable events, such as where share options have been granted/exercised or restricted stock units have been granted/vested. You should also allow time to identify and resolve any problems that arise. Importantly, where the business operates an EMI plan, care should be taken to notify any EMI option grants correctly otherwise the qualifying status of the EMI options is lost.