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

What are 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.

As the name suggests, 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 the 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

We have produced other blogs in this series to help:

• ERS year-end reporting: summary
• ERS year-end reporting: what is ERS year end reporting?
• ERS year end reporting: registration process and deadlines