6 July deadline for share-based employee incentives returns - what you need to know

Business Insights

Does your business have share-based employee incentives such as EMI Options or Share Option Schemes? If so, it is your responsibility to file annual Employment Related Securities (ERS) returns before 6 July 2022. Be careful, HMRC does not issue any reminders and penalties apply.

When do I need to file my returns?

Annual returns must be submitted online to HMRC between 6 April and 6 July in respect of the previous tax year, even if there has been no activity with the options. This applies in respect of HMRC tax advantaged arrangements (EMI, CSOP, SAYE and SIP) and also in respect non tax-advantaged arrangements (e.g. non-tax advantaged share options and growth shares).

What are the penalties?

There is a £100 initial fixed penalty for a late annual return. If a return remains outstanding more than three months after the deadline, there is a further fixed penalty of £300. If a return remains outstanding more than six months after the deadline, there is a further fixed penalty of £300. If a return remains outstanding more than nine months after the deadline, a penalty of £10 per day may be imposed by HMRC.

HMRC can also impose a penalty of up to £5,000 for a material inaccuracy in a return which is careless or deliberate, or which is not corrected by an amended return "without delay".

What do I need to report?

  1. The grant of share options (other than EMI options, which are notified separately) or the acquisition of shares by employees;
  2. The exercise of options – for example, if an option holder has exercised some of their options in the tax year;
  3. The release, lapse, cancellation or receipt of any benefit in respect of options – for example, if an employee leaves the company to work elsewhere, options will often lapse; or some companies may cancel and regrant options and this will need to be reported;
  4. An exchange (rollover) of tax advantaged (e.g. EMI) options – this applies when there is a company takeover and instead of exercising options the option holders exchange (‘rollover’) their options into the acquiring company;
  5. An adjustment of options – for example, if the company has undertaken a subdivision of shares this will affect the number of options and will need to be reported;
  6. Chargeable events – in respect of any shares held by employees (e.g. any enhancement in value or sale at over-value); and
  7. Nil returns - if the company has registered a share-based employee incentive arrangement, but there is no activity during a tax year, the company must still make a nil return. Failure to do so could result in a non-filing penalty.

If you’d like advice or guidance on setting up employee share options, the friendly team of legal experts at Harper James have extensive experience in helping businesses get to grips with employee share plans - a great way to attract and maintain the talent your business needs. Find out more via their website below.

Visit harperjames.co.uk