Employment related securities year-end: what has to be reported?

As the tax year ends, employers face various reporting obligations, especially for employment related securities (ERS). Understanding what needs to be reported is crucial to ensure compliance and avoid penalties. Find out about employment related securities reporting here.

What are ERS reportable events?

The most common events that need to be reported are the purchase and sale of shares by directors and employees. This may include shares being bought back from or sold by a founder shareholder and the award and exercise of share options.

The transaction doesn’t have to be between the company and the employee. A sale by one employee/director shareholder to another can be caught.

Reportable events are any events concerning employment related securities (ERS) that HMRC needs to be notified about on an annual return. Whether a tax charge will arise is a separate issue and depends on the exact nature and circumstances of the transaction. Bear in mind that the ERS return is not the tax collection mechanism – this remains PAYE (or the employee’s self-assessment tax return).

The following events may not need to be reported:

Newly incorporated companies – allocation of initial subscriber shares
Newly incorporated companies – allotment of further shares
Newly incorporated companies – shares acquired directly from the formation agents
Transfers of shares in the normal course of domestic, family or personal relationships

For completeness, the following events may need to be reported:

An acquisition of securities, an interest in securities or a securities option, acquired by reason of the individual’s employment or by reason of the employment of any other person
A chargeable event in relation to restricted securities and restricted interests in securities
A chargeable event in relation to convertible securities and interests in convertible securities
An event which discharges a notional loan relating to securities or an interest in securities
Doing anything that artificially enhances the market value of a security
Disposal of securities and interests in securities for more than their market value
The receipt of a benefit giving rise to a taxable amount which counts as employment income
The receipt of a benefit which is, or is regarded as being, received in connection with a securities option
The assignment or release of a securities option acquired by reason of the individual’s employment or by reason of the employment of any other person
Any reportable event regarding ERS as part of a tax advantaged scheme, must be reported under a separate registered scheme on the relevant form for that type of scheme

When to report employment related securities?

For ‘unapproved’ arrangements, you need only register the scheme with HMRC once a reportable event occurs for the first time. Complete this by 6 July following the end of the relevant tax year. Submit a return each tax year for registered schemes, even if there are no reportable events.

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.

Deadlines and penalties

All reportable employment related securities (ERS) events must be notified to HMRC on the annual return by 6 July 2025. To enable a return to be filed for any given year, the appropriate type of employee share scheme needs to be registered before the 6 July 2025 using the process above. As the registration process can take up to six weeks, we recommend registering the scheme in advance of this.

Although PKF Francis Clark can assist in the preparation and submission of other ERS returns (Form 42) or any approved scheme returns, it is the company’s responsibility to register the scheme(s) first. It is not possible for us, as agent, to submit a return for 2024/25 unless the company has first registered the scheme.

As the penalties are geared to the failure to submit returns, we recommend registering the fewest number of schemes possible. One return per scheme is due annually. For example, it is possible to register a single other scheme to report all non-tax advantaged ERS events for a whole group.

The registration process

In order to complete and submit a return a scheme needs to be registered online.

To register your schemes and arrangements, you need access to HMRC Online Services and PAYE for employers. Once you have access:

Login to HMRC online services
Continue past the security message
Click on ‘services you can use’ in the left-hand menu
Click on ‘PAYE for employers’
At the bottom of the page on the right-hand side there is a section called ‘employment related securities’. Click on ‘register a scheme or arrangement’ and follow the on-screen instructions

If you would like assistance, PKF Francis Clark can help you with the process of filing these returns. Unfortunately, determining whether or not a return is needed can be dependent upon information that may simply not be available to us. Therefore it is important you read through the brochure and our blogs and carefully consider for yourself whether it might apply.