Q&A: HMRC and employment related securities return

In our regular Q&A series, Croner Taxwise tax consultant David Woolley reviews the filing requirements for employer related securities returns and the importance of reportable events such as issues of unapproved shares

Q. My client company filed an online employment related securities return for 2017/18, do they have to file a nil return for 2018/19?

A. Whether a nil return is required depends on the specific facts.

If there is an unapproved scheme then section 421J Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) requires an online employment related securities return to be filed by a responsible person (s421L – generally the employer) only if there is a reportable event with s421K.

However, s421JA then states anyone who has been a responsible person must file a return each year during the ‘reportable event period’ which ends when ‘the person will no longer be a responsible person in relation to reportable events’.

Therefore, if there was one unapproved issue of shares in 2017/18, then it appears there may be no more reportable events in respect of the one-off ‘scheme’ and so no online employment related securities return is required.

In practice, HMRC wants you to confirm this by telling their computer system that the ‘employment related securities scheme’ has ended (probably so that it does not automatically issue a penalty notice for 2018/19). Online notification must be submitted on the HMRC website by following the link at the foot of the HMRC guidance.

Approved scheme

If there is an approved scheme then separate legislation applies. For example, if the 2017/18 employment related securities return filed was for an enterprise management incentive (EMI) option being granted, then para 52, Sch 5, ITEPA 2003 requires annual returns to be filed until there are no more unexercised EMI options, ie, the year in which the last EMI option is exercised should be the final year a return is required.

Regardless of this, HMRC must be notified that the ‘termination condition’ in para 52 has been met by telling them the ERS scheme has ended.

Be careful that you fully understand what is meant by a ‘reportable event’ for the employment related securities return.

HMRC’s guidance on page ERSM140070 of the Employment Related Securities Manual details some of the less obvious events that may need to be reported.

About the author

David Woolley is a tax consultant at Croner Taxwise

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