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United Kingdom: Annual Employment-Related Securities returns in 2024

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In brief

Following the end of the UK tax year on 5 April 2024, annual Employment-Related Securities (ERS) returns may now be filed online with HMRC. All companies with open share plan registrations with HMRC are required to submit an annual return, even if it is a nil return (i.e., even if there has been no share plan activity during the 2023 to 2024 tax year). The deadline for submission for the 2023 to 2024 tax year is 6 July 2024. Please note that the submission deadline applies regardless of the fact that this is a Saturday. HMRC will not send companies a reminder to file their share plan returns.

The annual share plan return will highlight to HMRC where net settlement is being used. We are increasingly seeing HMRC challenge the corporation tax deduction position of companies using net settlement procedures. Given HMRC challenges, we would urge you to get in touch with us if your company is using net settlement procedures.

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An annual return needs to be submitted by 6 July 2024 for the 2023 to 2024 tax year for each share plan that has been registered with HMRC online (unless it was de-registered in a previous tax year). The return will need to cover all reportable events between 6 April 2023 and 5 April 2024. Reportable events include:

  • For options – the grant (including on a rollover/assumption), exercise, assignment, or release for consideration (not a lapse for nil consideration) or the receipt of a benefit in connection with the option.
  • For Restricted Stock Units (RSUs)/conditional share awards – the grant, vesting, assignment, or release for consideration (not a lapse for nil consideration) or the receipt of a benefit in connection with the award.
  • The purchase of shares under share purchase plans (and potentially the grant of purchase rights).

The return needs to be filed by the entity that registered the plan with HMRC using the plan’s unique reference number. For those companies that do not regularly access HMRC’s website, now is the time to relocate those log-in details or identify the person who has access.

The template forms and guidance on how to complete them can be found here.

By way of reminder, non-tax-advantaged awards and plans must be reported on the “other” template. There are separate templates for each of the tax-advantaged CSOP, SAYE, EMI, and SIP plans. If the template does not match the plan registration, the submission will be rejected.

Before submission, files uploaded to HMRC’s website will be checked for formatting errors by HMRC’s checking service. The files are format-sensitive so companies are encouraged to check their files in advance of making the submission. This can be done here.

The website that HMRC introduced to report on the service availability of HMRC’s website and any planned downtime remains available. It can be accessed here.

HMRC guidance

Net settlement

In 2023 HMRC updated its guidance regarding the net settlement of securities option awards and the associated limitations which this has on claiming a corporation tax relief in the UK. Please see our Client Alert here for further information.

In the annual return there are differences in reporting:

  • Shares acquired via an option versus a direct share acquisition.
  • ‘Net settling’ versus operating ‘sell to cover’.

The annual share plan return will therefore highlight to HMRC where net settlement is being used. We are increasingly seeing HMRC challenge the corporation tax deduction position of companies using net settlement procedures. Given HMRC challenges, we would urge you to get in touch with us if your company is using net settlement procedures.

Updated template return for CSOP

HMRC has published its Employment Related Securities Bulletin 54 containing an updated template for CSOP annual returns to reflect that the value of CSOPs that can be held by an individual has increased from GBP 30,000 to GBP 60,000.

HMRC has also included CSOP guidance and technical notes on these changes. The Bulletin also contains updated guidance on the changes to the Enterprise Management Incentives (EMI) notification deadline for EMI options granted from 6 April 2024. A company must now notify HMRC of the grant by 6 July following the end of the tax year in which the grant was made. The previous requirement was to notify HMRC within 92 days.

If you need any assistance with the preparation of your annual share plan return, please do not hesitate to contact a member of your Baker McKenzie team.

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Author

Jeremy Edwards is a partner and the head of the Employee Benefits Group in Baker McKenzie’s London office. He advises on all aspects of employee share plans and employee taxation. Jeremy has over 20 years’ experience as a share plan lawyer and two years’ experience as a corporate lawyer. He is currently serving on the advisory panel of ProShare and is a regular speaker at share plan conferences held in the United Kingdom.

Author

Amy Thompson is an associate in the Employee Benefits Group, part of the Employment Department of the London office of Baker McKenzie. She is a member of the Firm’s Global Employment and Compensation Practice Group, which provides tailored advice in respect of a variety of corporate, tax and labour law issues. Amy has joined Baker McKenzie from South Africa where she worked as a tax and employment law professional.

Author

Will Clifton is an associate in the Employee Benefits Group, part of the Employment Department of the London office of Baker McKenzie. He is a member of the Firm’s Global Employment and Compensation Practice Group, which provides tailored advice in respect of a variety of corporate, tax and labour law issues. Will joined Baker McKenzie after more than 8 years at PwC where he worked in the Reward & Employment and Global Mobility business units.

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