When it comes to doing your taxes, you’re not alone if your organisation forgets one crucial deadline: registering your employment related securities (ERS).
Employers use ERS schemes to award or gift shares of a company to their employees. If you’ve been awarded any such shares or share options during the last tax yea’s (6 April 2023 through to 5 April 2024), you have until 6 July 2024 to submit your ERS return.
If you don’t, your organisation will face ongoing penalties until you file, and your employees could lose their tax advantages depending on the type of share award or share option that they have received.
Overview of the 6 July 2024 ERS Deadline
Come 6 July 2024, you need to have filed an online return if (at any point in the last tax year) you registered a new ERS scheme or if you had an existing scheme in operation at any point. This applies even if there have been no transactions. According to HMRC, the UK’s tax authority, “If your ERS scheme has ceased and you have entered a final event date, you must submit any outstanding returns up until the date of cessation.”
Scheme Registration Requirements
ERS schemes fall into two categories: tax-advantaged and non-tax-advantaged.
Approved (Tax-Advantaged) Schemes
Approved ERS schemes are a way for you to reward your employees. Some carry a tax advantages, meaning they could be exempt from income tax and/or national insurance depending on the companies circumstances. Examples of approved schemes include:
- Enterprise Management Incentives (EMI): EMIs allow you to gift share options of up to £250,000 in value. Your employees must work for the company for at least 25 hours a week and they must have a shareholding which is less than 30% to be eligible Note: Once you register this scheme type, you’ll need to notify HMRC directly.
- Company Share Option Plan (CSOP): CSOPs give your employees the option to buy up to £60,000 worth of shares from 6 April 2023. For options granted before 6 April 2023, the scheme allows them to buy shares worth up to £30,000.
- Save-As-You-Earn (SAYE): This scheme lets your employees buy shares with their savings for a fixed price. They can use this to save up to £500 a month.
- Share Incentive Plans (SIP): This scheme allows employees to regularly save and buy shares. To qualify for the tax advantage, they’ll need to buy and retain shares in the plan for five years. This way, they are exempt from income tax.
Unapproved (Non-Tax-Advantaged) Schemes
Broadly, although these ERS schemes don’t offer your employees any tax advantages they are still useful in retaining key employees. From a reporting perspective they carry the same reporting obligations as approved schemes. If you have multiple unapproved schemes, you can report them in a single return. Additionally, you’ll need to notify your employees of their personal tax obligations.
Annual Returns Submission
Every year, your company must file an annual return with HMRC for any registered ERS schemes by 6 July following the end of the tax year. This applies even if you have inactive schemes and, therefore, nothing to report, you’ll need to submit a nil return.
If your organisation has set up several approved ERS schemes, you must file separate returns for each of them. You can use a single return if you have multiple unapproved schemes.
Consequences of Missing ERS Deadlines
For any ERS return not filed by 6 July, your organisation will incur an automatic £100 penalty. If the return is still not filed three months after the original due date, you’ll be charged a further £300. Where six months have passed and the return has still not been filed a further £300 penalty will be charged. Failure to file nine month after the original due date may result in HMRC applying a further penalty of £10 per day.
Additionally, your employees could lose their tax advantages if you fail to register the ERS scheme in time.
File Your Returns By 6 July
If your company sets up an ERS scheme for its employees, registering it and filing returns is mandatory. Get this done by 6 July 2024 to avoid paying fines and ensure your employees can retain the accompanying tax advantages.
If you have any questions about how this deadline impacts you or your organisation, you may reach Pritpal Chaggar, a Prager Metis Tax Manager, at pchaggar@pragermetis.com.
Our team knows that tax planning is a year-long process. If you want a partner that can help you maximise your advantages and meet every obligation, let’s talk.
