HMRC started writing to some company owners from 4 February 2024 to inform them that they may have underdeclared dividend income. This is one of HMRC’s…
The ERS returns are accessed through the same online portal as you use for your usual payroll filings. Your business is probably already registered as an employer, but if going online for the first time, you’ll need to first register for online services via the HMRC website, selecting ‘PAYE for employers’ and following the instructions. Within your account you can register your share schemes in the ERS section, which is where you’ll find the various forms. HMRC’s guidance can also be accessed through this online portal.
You will receive a scheme reference number in respect of each share scheme you have, which is needed in order to prepare and submit the relevant returns. These are:
- Form 34 for save as you earn (SAYE)
- Form 35 for company share option plan (CSOP)
- Form 39 for share incentive plan (SIP)
- EMI40 for enterprise management incentive (EMI)
- Other ERS return (formerly known as Form 42) for unapproved arrangements.
If you have one of the tax advantaged share plans in place, i.e. EMI, SAYE, CSOP or SIP, then you will have to complete the relevant form. Information on registering and submitting returns is below. Everything else reportable goes on the ‘other ERS return’.
When to report
For ‘unapproved’ arrangements, you need only register the scheme with HMRC once a reportable event occurs for the first time, and this must be done by the 6 July following the end of the relevant tax year. Once a scheme has been registered, a return will be required for each tax year, regardless of whether there have been any reportable events during that year.
This deadline is especially important now that HMRC no longer issue notices or reminders to file online. HMRC will issue automatic penalties both for returns filed after this date and for returns not made electronically.
Please note, confusingly, HMRC refer to all such arrangements as ‘schemes’, however, there are in fact a wide variety of reportable transactions.
What are securities?
The word ‘securities’ describes a wide range of financial instruments and includes, among other things, government and corporate bonds, loan stock and shares.
When are securities ‘employment related’
Sometimes it is obvious when a security is employment related, such as where a manager is rewarded with shares for good performance.
However, the actual definition is much wider. Securities are deemed to be employment related if acquired by a current, former or prospective director or employee. There may be a limited exception if you can show the transfer is by reason of a family or domestic relationship. However, due to the wide range of the deeming provision even ‘founder shares’ are caught.
We have produced other blogs in this series to help:
- ERS year-end reporting: summary
- ERS year-end reporting: what has to be reported?
- ERS year-end reporting: registration process and deadlines