Employment-related securities returns explained

Employment-related securities (ERS) returns must be submitted to HMRC by 6 July 2026 following the end of the tax year via HMRC’s online ERS reporting service.

All companies that have issued, granted, transferred or otherwise varied employment-related shares or share options during the tax year ended 5 April 2026 are required to consider their ERS reporting obligations. This includes situations where no cash consideration was paid or where the transaction may not have been regarded as ‘employment-related’ at the time.

HMRC doesn’t issue reminders to file ERS returns. Failure to comply can result in automatic financial penalties and (in certain cases) the loss of valuable tax reliefs.

Here, Todd Whitworth and Euri Yoon from our corporate tax advisory team outline what employment-related securities are, when reporting is required, how to register and file them and the penalties for non-compliance.

What are employment-related securities?

Employment-related securities are widely defined and include any securities acquired or deemed to be acquired by reason of an individual’s employment or office. These extend beyond formal incentive arrangements and can capture a broad range of situations, including holdings of shares in a company or group company, share options and other forms of securities such as loan notes or debentures.

Importantly, securities may be treated as employment-related even where they’re acquired at market value or the individual is a director or employee-shareholder who doesn’t regard the holding as part of their remuneration package. HMRC’s deeming provisions mean that many employees and director shareholdings fall within the ERS regime as a matter of law — regardless of how the arrangement is perceived in practice.

ERS reporting isn’t limited to UK‑incorporated companies and may also apply to employment‑related securities in overseas entities where the individual is a UK tax resident or has performed duties in the UK during the tax year.

When is ERS reporting required?

An ERS return is required when a reportable event has occurred during the tax year. 

Common reportable events include:

• The issue, transfer or acquisition of shares by employees and/or directors.
• The grant, exercise, variation or lapse of share options.
• Changes to the rights attaching to shares or to any restrictions affecting them.
• Disposals of securities for more than market value.
• The grant of options under an Enterprise Management Incentive (EMI) arrangement.

Transactions don’t need to occur under a formal share scheme to be reportable and can include one‑off events that arise in the context of corporate transactions or reorganisations.

When a company has an ERS scheme registered with HMRC but no reportable event has occurred during the year, a nil return must be submitted by the 6 July deadline.

Are any exemptions available?

HMRC provides a limited number of reporting exemptions where specific conditions are met. These may apply in relation to founder or subscriber shares acquired on incorporation or from a company formation agent, the allotment of further shares before a company commences trading and certain transactions involving flat management companies or members’ clubs.

However, exemptions are narrow and fact specific. Where no exemption applies, an ERS reporting obligation may still arise even if no income tax charge is expected to result from the transaction.

Registering & filing ERS returns

Each ERS arrangement must be registered with HMRC before an annual return can be submitted. Registration and filing are carried out online via a Government Gateway account using HMRC’s PAYE and ERS services. Companies submitting ERS returns for the first time should be aware that setting up the necessary access can take several weeks and should therefore be started well in advance of the filing deadline.

Approved share option schemes (such as EMI schemes) fall within ERS reporting and require separate annual ERS returns for each scheme. The grant of EMI options must be notified to HMRC by 6 July following the end of the tax year of grant, failing which the options won’t qualify as EMI options and the associated tax reliefs will be lost (in addition to any late‑filing penalties).

Penalties for non-compliance

HMRC imposes automatic penalties on late or missing ERS filings. 

These include:

• £100 penalty for failure to submit a return by 6 July 2026.
• £300 if it’s still outstanding after three months.
• Another £300 if the return is still outstanding after six months.
• Daily penalties of £10 may apply where non-compliance continues beyond nine months.

Penalties apply equally to nil returns and additional penalties of up to £5,000 may be imposed where returns contain inaccuracies. 

Speak with our experts

Our corporate tax advisory team regularly helps companies and management teams to navigate ERS matters, including identifying when ERS reporting obligations arise, assessing the availability of reporting exemptions, advising on ERS scheme registration requirements and supporting clients with the preparation and review of annual ERS and nil returns, as well as the wider tax implications of employee and director share arrangements.

If you’re unsure whether your company has an ERS reporting obligation for the 2025/26 tax year or would like assistance with ensuring compliance, talk to us by calling 0333 004 4488, emailing hello@brabners.com or completing our contact form.