Employment Related Securities Bulletin 39 (August 2021)
Find out about ERS online service, annual returns, ceasing a scheme no longer operating or registered in error, net settlement reporting and Non-Statutory Clearance process.
Employment related securities bulletins give information and updates on developments relating to employment related securities (ERS), including the tax-advantaged employee share schemes.
HMRC publishes ERS bulletins when:
- articles or updates are available
- HMRC has any item to bring to your attention quickly
Any reference to Income Tax (Earnings & Pensions) Act 2003 (ITEPA) is to the current legislation as amended.
Contacting HMRC for advice
Make sure you include the relevant share scheme reference number if you have one, when you contact us about share schemes. If you have not provided the share scheme reference HMRC may not be able to respond to or answer your query.
You can find more information on how to identify your share scheme reference number in ERS Bulletin 25.
ERS online service
HMRC is aware that customers can encounter difficulties when trying to submit their annual ERS returns. If this happens, try to submit your return again and if problems continue, report this to us using the ‘Is this page not working properly’ link where provided. This will ensure your query is escalated to the right team at the earliest opportunity.
You should take a screen shot or keep a printed copy of any on-screen error message you receive. This will help HMRC when considering any late filing penalty appeal you may subsequently need to make.
Annual Returns
Annual ERS returns should be submitted on or before 6 July following the end of the tax year. Nearly a third of registered share schemes did not file their tax year 2020 to 2021 ERS return by 6 July 2021, resulting in late filing penalties being issued. Even if there have been no reportable events in the year a nil return must still be submitted. There is a continuing obligation to file returns every year until the scheme ceases and a final event date is entered.
Ceasing a scheme no longer operating or registered in error
To cease a scheme, you must access the ERS online service through the company’s PAYE for Employers account.
You must have filed annual returns for every year even if the return was nil.
- When you’ve accessed the account, you’ll need to scroll down to the bottom of your screen and select ‘View schemes and arrangements’.
- Select the relevant scheme and enter a date of final event in the next screen.
The process for ceasing an Employment Related Securities (EMI) scheme
- After you have selected ‘View schemes and arrangements’ and selected the relevant scheme.
- Select ‘End of year returns’.
- Select ‘provide a date of final event’ and enter the date. This can be a date in the past but remember that an annual return must be submitted for the tax year in which the final event date falls.
ERS agents do not have the function in their agent ERS online service to enter the date of final event for any scheme so this can only be completed by companies.
If you’re uncertain why a scheme was registered on the ERS online service or you consider it was registered in error, check with the company secretary or seek professional advice.
A scheme can only be registered by someone in the company who has access to the company’s HMRC online services account.
Net settlement and annual reporting requirements
HMRC published guidance on how to report the net settlement of share awards in ERS Bulletin 33.
We continue to receive queries about reporting net settlement of awards and have set out the process using the example in Bulletin 33.
This is based on a nil-cost option award over 1,000 shares. At exercise, the shares have a market value of £20 per share. The ‘Other_Options_V3’ tab of the ‘Other employment related securities schemes and arrangements: end of year return template’ should be completed as follows:
- on one row report the acquisition of the actual number of securities delivered to the employee — in this example that would be ‘580’ — that will be awarded to the employee in column number 31 (along with other relevant information in the other columns)
- on another row, report the cash cancellation or receipt of a benefit by entering a ‘Yes’ in column number 30 and including the shares given up in column number 31 — in this example that would be ‘420’, columns 32 to 37 would be left blank and then you would enter ‘yes’ in column 38 and the sterling value of the cash received — in this example ‘8,400’ (being 420 x £20) — in column 39 (along with other relevant information in the other columns)
If companies have only completed one row in respect of net settled awards, then they should review and amend their ERS returns to include 2 rows to show both the net shares received and the shares cash cancelled.
If companies have been completing 2 rows of the ERS schedules, as outlined in ERS Bulletin 33, but have reported differently to the position outlined earlier in this bulletin in column numbers 30 to 37, then HMRC will not require that historic ERS returns are amended. The position outlined earlier in this bulletin should be applied to any new filings from tax year 2021 to 2022 onwards.
Sell to Cover
In sell to cover cases where the securities under option are actually beneficially acquired and then disposed of, the total number of shares acquired should be recorded on one line. This may be the case even where shares are not physically transferred to employees and are sold by the employer as agent on behalf of the employee.
Restricted Securities
For the vesting of restricted securities, even if on the occurrence of a chargeable event, securities are disposed of to cover any PAYE or National Insurance contributions, the chargeable amount in box 11 of ‘Other_RestrictedSecurities_V3’ tab should be the value of the gross number of shares subject to the chargeable event.
Non-Statutory Clearance (NSC) Process
HMRC share schemes teams continue to provide advice and support, where they can, in response to enquiries sent to the Shareschemes mailbox. Contact details are set out later in this bulletin. This mailbox should be used for general or straightforward enquiries after you have consulted the guidance in both the Employee Tax Advantaged Share Scheme User Manual and the Employment Related Securities Manual.
For cases of complexity or where there may be ambiguity in the application of the legislation, the NSC process is the appropriate method for contacting HMRC. You should follow the Non-Statutory Clearance Service guidance and provide information as set out in the relevant Appendix. (Usually Appendix A).
All enquiries should be submitted with all relevant supporting documentation to include but not limited to:
- option agreements
- scheme plan rules
- articles of association
HMRC’s contact details for share schemes enquiries
HMRC appreciates that many of the issues surrounding employment related securities and the coronavirus (COVID-19) pandemic have caused concern to stakeholders, many of whom have contacted the share schemes mailbox.
You can find further information on available support for businesses at coronavirus (COVID-19) business support
Due to the situation with the (COVID-19) pandemic there may be delays in post reaching this team. We recommend that you submit all enquiries by email to [email protected].
If you need to disclose sensitive information, and have concerns about sending this by email, you should send a short email:
- without any sensitive data
- with details of how we can contact you
We’ll get back to you as soon as possible to arrange an alternative.
If you prefer to send enquires by post, our address is:
Charities, Savings and International 1
HMRC
BX9 1AU
Changes to HMRC email addresses
We’ve been making changes to our email addresses in HMRC. You may have noticed that instead of our email addresses ending in @hmrc.gsi.gov.uk, they’ll end @hmrc.gov.uk. Any emails that you send to our old email addresses will still redirect to us.
Contact HMRC about ERS Bulletins
If you have any questions, feedback or suggestions for future articles you should email: [email protected].