TICK TOCK – final countdown to HMRC filing deadline!

The 6 July 2025 deadline for notifying any new option grants and reporting other ‘reportable events’ to His Majesty’s Revenue & Customs (“HMRC”) is fast approaching. And with the weekend (and, for US companies, Independence Day office closures) before then also, there is no time to lose in finalising your employment-related securities (“ERS”) annual return for the tax year 2024/25.

What is an ERS annual return?

All new incentive plans and similar arrangements where ERS have been awarded to UK employees and/or directors between 6 April 2024 and 5 April 2025 (both tax advantaged and non-tax advantaged) must be registered with HMRC and any ‘reportable events’ must be notified to HMRC using their online share plans portal by 6 July 2025. This is an annual obligation known as a company’s ERS annual return or share plans filing.

‘Reportable events’ include the acquisition of growth shares or other direct shareholdings by employees and/or directors, as well as the grant and vesting of conditional awards (also known as restricted stock units or RSUs) and the grant and exercise of options. Lapses, cancellations and share disposals are also included.  Equity awards held by non-executive directors located in the UK must be reported, and you may also need to report on non-UK employees/directors with responsibilities in the UK.

If you offer equity awards to your UK “employees” through an employer of record (EOR) or professional employer organisation (PEO) arrangement, annual returns are still required.  Your EOR or PEO should be able to make these filings on your behalf, so make sure they are aware you expect them to do so.

What happens if I don’t submit my return?

If you don’t submit your return accurately and on time, any UK tax-advantaged options granted in the 2024/25 tax year will automatically lose their tax status. This includes Enterprise Management Incentive (EMI) options and options granted under a tax-advantaged Company Share Option Plan (known as CSOP options), as well as all-employee awards under a tax-advantaged Share Incentive Plan (SIP) and/or a tax-advantaged Save-As-You-Earn (SAYE or sharesave) option plan.

HMRC may re-instate the lost tax status in certain circumstances, but this is not guaranteed, and the safest approach is to ensure you register your UK tax-advantaged option plans and notify the grants made between 6 April 2024 and 5 April 2024 by 6 July 2025.

What about non-tax advantaged ERS?

For ‘unapproved’ or non-tax-advantaged ERS (such as unapproved options or RSUs), failure to meet the 6 July 2025 deadline may result in penalty fees for late filing of your ERS returns. These fines are typically low value but HMRC does have the power to levy additional fines and to apply a daily penalty if the annual return remains unfiled for nine months after the deadline has passed.

More broadly though, HMRC has been known to look unfavourably on companies with poor ERS filing compliance in situations where more significant tax consequences are at stake. Correctly filed annual returns can also be a good indicator of general tax compliance to buyers/investors during a due diligence process, as well as providing strong support for beneficial tax treatment where section 431 elections have been mislaid by employee/director shareholders.

What if there weren’t any reportable events last tax year?

If you have previously registered an equity plan with HMRC, you must submit a ‘nil return’ even if there has been no ‘reportable events’ during the 2024/25 tax year unless the plan has been terminated and you have notified HMRC of such termination.  Speak to us before terminating your plan registrations though as there are a few easy pitfalls we can help you avoid.

Can Bird & Bird submit the ERS return for us?

Unfortunately, a Government Gateway Payroll ID is required to make the filing and so Bird & Bird cannot submit the return for you.  Your payroll provider or accountants can usually assist you with this process.

However, if you are completing the process yourself or have any general questions about the content of the ERS returns or the submission process, we would be delighted to help and can screen share if needed to guide you through the online system. If you have missed ERS filings in the past, we are also able to advise you on late submission and how best to approach HMRC to rectify the position.

Any top tips?

The ERS portal will reject your filing if the formatting is not up to scratch. Make your life easier by using the filing templates available on HMRC’s website. You can even use HMRC’s checking service to make sure your draft return meets the formatting requirements through this website: Check employment-related securities files - GOV.UK

It's particularly important to save a copy of your returns for your own records before you submit them. Take screenshots of each page and save them along with a copy of the confirmation page: the HMRC online service does not store these details, and you will not be able to retrieve them later once you have uploaded your return. This is the most common problem we see on share plan due diligence, so make sure to keep accurate records of your ERS returns, including proof of timely EMI and CSOP grant notifications, to smooth the due diligence process as part of your next fundraising, sale exit or future listing!

Where can I find out more?

You can find more information about filing your ERS returns from these HMRC websites:

1. Register your employment-related securities scheme - GOV.UK.
2. Employment-related securities: submit returns - GOV.UK

If you have any questions about your current or past ERS filings (including any concerns about future due diligence), please reach out to the Bird & Bird Employee Incentives & Benefits team via email at [email protected]. We would be delighted to help and offer pragmatic advice tailored to your commercial circumstances.

Do you have questions or need assistance? Feel free to contact us.