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ERS

Employment related securities (ERS) refers to shares or securities that a limited company gives to employees.

This can be an effective way of rewarding employees, offering them incentives, and retaining talent.

However, if you choose to use an ERS scheme in this way, you must also be compliant by providing HMRC with an ERS return.

We can give you the support you need to make ERS work for your business and its employees, and make sure you stay on the right side of HMRC.

ERS schemes are a way of companies transferring shares to employees, including company directors.

These schemes can be either tax advantaged or non-tax advantaged. Tax advantaged schemes enable employees to avoid paying things like income tax or national insurance on the value of the shares they receive.

These types of schemes include:

  • Company share option plants (CSOP)
  • Enterprise management incentives (EMIs)
  • Share incentive plans (SIP)
  • Save as you earn (SAYE).

However, for many smaller companies, running a tax-advantaged scheme is too complicated. They are looking for a more straightforward transfer of shares.

But doing this may mean that HMRC still classifies the transfer as ERS, requiring a return.

Therefore, it’s important to check when issuing shares to employees.

In certain circumstances, you do not require an ERS return for HMRC:

  • If the share transfer is part of a domestic, family or personal relationship
  • If the shares transfer to shareholders who aren’t employers or directors
  • If you issue shares before your company starts trading.

You must tell HMRC about any new employment related securities schemes you’ve launched, or schemes that have stopped.

You must register all new tax advantaged ERS schemes by 6 July of a tax year. This includes one-off awards or gifts of shares.

You cannot register these schemes after 6 July:

  • Company share option plants (CSOP)
  • Share incentive plans (SIP)
  • Save as you earn (SAYE).

You must also register non tax advantaged schemes if these involve a reportable event, such as:

  • Acquiring or disposing of securities
  • Assigning or releasing securities options.

You must also inform HMRC if you grant enterprise management incentives (EMI) share options.

You need to submit an annual ERS return for each registered scheme you run. You must do this every year, even if there’s no reportable event.

Submit your ERS return, even if:

  • There have been no transactions
  • You’ve had no reminder from HMRC
  • The scheme is registered in error, or is a duplicate of another scheme
  • You’ve appealed a penalty for late filing.

If your ERS scheme ceases, you must tell HMRC, and give a final event date.

HMRC will assume you’re limited company director and you’ve transferred or awarded shares to an employee or director in your company.

Your company will need an HMRC Government Gateway account and an existing PAYE scheme.

You must set these up first if you don’t already have them.

There are various stages to filing an ERS return:

  • You must activate PAYE for employers online on your Government Gateway account
  • You must get a valuation of the shares and awards you’ve transferred
  • You must complete the relevant government spreadsheet template for your return.

You should get an up to date, independent valuation of your shares.

But be careful: HMRC may dispute your valuation if they do not feel it’s accurate.

You can value your shares yourself, using HMRC guidance, but to get an accurate valuation, we recommend you seek professional advice.

HMRC is interested in employment related securities because when employees acquire these shares or securities without paying market value, they may be still liable to income tax based on their market value.

ERS rules aim to modify the position in cases where the tax consequences of receiving these shares do not reflect the full economic value of the shares.

Therefore, HMRC requires regular, up to date information about ERS schemes, and companies concerned must comply with this.

Without a clear understanding of the requirements and deadlines, there’s always the risk of becoming non-compliant unintentionally.

Compliance is a critical part of running a company successfully. Venn Accounts can make sure your employee related securities schemes follow the rules.

But we can also advise you on the best tax position you can gain for your employees by the type of ERS scheme you choose.

If you want to reward or incentivise your workforce, you also want them to be able to take full advantage of your generosity.

We’re London-based chartered accountants, but we specialise in cloud accounting services, so it doesn’t matter where you are, we can give you our expert help, advice and guidance.

Please call us on 02080882590, email enquiries@vennaccounts.com or complete our contact form and one of our senior accountants will get back to you as soon as possible.

You’re the expert in your field, and we’re specialists in ours.

We’re here to help and support you, bringing our extensive working knowledge to you, working with you.

When you want to file your annual accounts, you want to know they’re in safe, capable hands.

Traditional Accounting With Clear Principles

Operating from our London head office, Venn Accounts a traditional accounting firm. We are committed to ensuring all our clients are completely clear about what we can do for them, while fully supporting them every step of the way.

To speak to a member of our team about our payroll management service, contact Venn Accounts directly on 02080882590 or email enquiries@vennaccounts.com.

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