Employment Related Securities (ERS) refers to shares, options, or other securities that are acquired by an individual by reason of their employment.
What counts as Employment Related Securities?
ERS includes:
- Shares in a company
- Share options (rights to buy shares at a fixed price)
- Debentures, loan stock, and other financial instruments
- Rights or opportunities to acquire securities
- Interests in securities
- Off-market variations of rights
If an employee, director, or office holder receives securities due to their employment, it’s considered ERS. There are limited exceptions, such as transfers made in a purely domestic or family context (e.g., gifting shares to a spouse or child).
Tax implications
ERS can trigger tax obligations for both the employer and the employee. These include:
- Income Tax and National Insurance Contributions (NICs) on acquisition or disposal
- Capital Gains Tax (CGT) on subsequent sale
- Corporation Tax deductions for the employer in some cases
Reporting requirements
An Employment Related Securities declaration may be required for each tax year ending 5 April. The deadline for submission is 6 July following the end of the relevant tax year.
The declaration is required under any of the following circumstances:
- Receipt of a Notice to File an Employment Related Securities form from HMRC.
- Occurrence of a reportable event during the tax year ended 5 April. Reportable events include:
- Directors or employees receiving shares as part of their employment during the tax year.
- Any other share transactions involving directors and employees.
The Employment Related Securities template is available on HMRC’s website. The Other Acquisitions tab needs to be completed and uploaded through HMRC online services. Additional guidance can be found here.
To file the declaration, please follow these steps through HMRC Online Services:
- Log in to the company HMRC Online Services
- Scroll to the ‘Other services’ section at the bottom of the dashboard page and select ‘ERS Online Service’.
- Click ‘register a scheme or arrangement’ and select ‘Other’ as the Scheme type.
- Follow the subsequent on-screen instructions.
Don’t forget open schemes
Please note that once a scheme has been registered, HMRC requires annual returns to be submitted until the scheme is officially closed. While HMRC will not request subsequent returns, a £100 late filing penalty will be imposed if a return is not made. If there are no anticipated future reportable events, ensure you submit the final event date to close the scheme.
If you would like to discuss this in more detail relating to your business, please feel free to book a free online meeting
