The deadline for employers to file their annual employment-related securities (ERS) returns with HMRC for the 2025/26 tax year is approaching.

You will likely have a requirement to file by 6 July 2026 if:

• UK directors, employees, or employees with UK work duties have acquired shares or other securities in your company.
• Your company operates an employee share plan or arrangement.

When is an ERS return required?

Annual ERS returns are required to report events relating to securities (such as options, shares or loan notes) involving employees and/or directors, including both founding directors and non-executive directors.

A company must ensure it has registered its share schemes and ERS events properly online via the HMRC PAYE portal. Transactions do not need to be part of a formal share scheme to be potentially reportable and can include ‘one-off’ events (for example, certain corporate transactions and re-organisations). Reporting may also be required for shares/securities located outside of the UK.

We recommend reviewing any activity involving UK employees/directors that involves shares, options or other securities to confirm whether there is a registration and reporting requirement.

Any scheme registered online will require annual returns to be filed for subsequent tax years, irrespective of whether there have been any reportable events in those tax years, unless the scheme has been formally closed.

Updated HMRC guidance for short term business visitors

HMRC has updated its guidance on employment-related securities reporting. This has clarified the rules for short-term business visitors.

From the 2025/26 tax year onwards, employers will need to consider short-term business visitors when preparing their ERS reporting.

They may need to include any employee receiving employment-related securities who has worked in the UK during the period from grant to vest, even if they only worked in the UK for one day.

Employers are likely to face a higher administrative burden following HMRC’s updated guidance, especially international groups with lots of employees travelling to the UK.

Net settlement arrangements and ERS annual reporting requirements

From April 2026, HMRC is changing how net settlement arrangements and ERS annual reporting requirements should be reported on an ERS annual return. Net settlement is a method of option exercise in which the employer uses its own cash to settle the income tax and National Insurance contributions (NICs) due under PAYE on the employee’s option gain. Instead of issuing all the shares under option and requiring the employee to sell some to cover the tax, the employer issues a reduced number of shares whose value equals the employee’s after‑tax amount. The economic result to the employee is the same as if all shares had been delivered and some sold to cover tax.

The change means employers will report net settled awards on one line when completing relevant questions within the ‘Other’ annual ERS return end of year template. Previously there was a requirement to complete two lines of information to report net settlement on the ERS end of year return.

HMRC has confirmed in an ERS Bulletin that there will be no changes to the structure nor format of the end of year return template.

What is reportable to HMRC?

The events and transactions that can be classified as ERS are wide-reaching and the rules can apply even if there is no formal employee share plan in existence.

This could include (but is not limited to):

• HMRC tax-advantaged plans, such as enterprise management incentives (EMIs), company share option plans (CSOPs), save as you earn (SAYE)/sharesave, and share incentive plans (SIPs).
• Share acquisitions and disposals.
• Share options.
• Share-for-share exchanges.
• Overseas plans with UK participants, such as restricted stock units (RSUs), restricted stock awards (RSAs) and employee stock purchase plans (ESPPs).
• Group re-organisations and other corporate transactions.
• Variations in share capital.
• Carried interest arrangements.
• The lifting of restrictions attached to shares (including on disposal).
• Transactions involving loan notes or warrants.
• Units in investment schemes.

Common issues with ERS returns

Employers often do not recognise that share transactions are reportable via an ERS return or may mistakenly fail to deduct income tax and NICs through PAYE.

This oversight might only become apparent when the annual ERS return is being filed.

Common issues include:

• Failure to register a CSOP, SIP or SAYE scheme online by 6 July following the tax year in which the first awards were granted. This will result in any awards granted in that previous tax year not qualifying for the associated tax reliefs.
• Failure to notify HMRC of the grant of EMI options by 6 July following the tax year-end of each grant date.
• Global equity plans with UK participants, where UK tax/reporting treatment may be different to that of the plan’s ‘home’ country.
• Employees or directors acquiring/disposing of shares at a price different from the market value for tax purposes. This could be the case if, for example, a pro-rata value is paid to an employee selling a minority shareholding.
• Share class re-designations or other restructuring, particularly if it results in an uplift in the market value of particular shares.
• Share-for-share exchanges, bonus issues, and rights issues involving employees.
• Transactions in one individual’s shares affecting the value of another person’s shares.
• The lifting of restrictions attached to shares. For example, if shares were subject to a forfeiture provision for a limited time and that time has passed.
• Gifts of shares to friends.

HMRC does not send reminders to file ERS returns, but will issue automatic late filing penalties.

If annual ERS returns have not been filed for each open scheme by 6 July following the end of the tax year, HMRC can levy automatic late filing penalties (starting at £100 per scheme). Returns containing a ‘material inaccuracy’ can result in additional penalties.

Next steps for your ERS return

We always recommend carrying out regular reviews of your employee share arrangements and the ways in which they operate alongside the annual returns process.

This ensures the arrangements remain compliant with legislative changes and updates to HMRC practice or guidelines, and that they are achieving their intended purpose.

Reviewing your ERS reporting as early as possible also ensures you have sufficient time to prepare and submit the returns ahead of the 6 July deadline.

If you have any questions or concerns about ERS or need help keeping up to date with your filing obligations, please get in touch with Fiona Bell, Simon Adams, Martin Cooper or your usual RSM contact.

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