Employment Related Securities – are you meeting your annual reporting obligations?

Following the close of the 2025-2026 tax year, employers that operate employee share schemes or other share-based arrangements should be aware of the upcoming deadline for filing their Employment Related Securities (ERS) annual returns by 6 July 2026.

All reportable events which occurred during the tax year ending 5 April 2026 must be reported on the annual return. The reporting obligation is mandatory for all registered schemes and arrangements, meaning nil returns still need to be made to meet that obligation, even if there have been no reportable events within the tax year. Any missed filings will result in automatic financial penalties being issued by HMRC which start at £100, increasing to £300 if not filed within nine months with daily penalties applying thereafter should the return remain outstanding.

Annual returns must be filed electronically through HMRC’s ERS Online Service, and the relevant scheme must be registered in advance before a return can be submitted. Companies should therefore ensure that all new schemes are registered well in advance of the filing deadline.

What are ERS annual returns?

ERS returns are part of HMRC’s compliance framework for monitoring employee share arrangements and awards. They apply to a broad range of companies, including many who may not immediately associate themselves with share schemes.

An ERS return is an annual report submitted to HMRC detailing certain share-related transactions involving employees or directors. This includes awards or transfers of shares, share options, or securities that are connected to an individual’s employment.

The requirement applies even where shares are issued at full market value and no income tax or National Insurance contributions arise. The filing obligation is triggered by the existence of a reportable event, not by whether tax is payable. Common reportable events include the purchase and sale of shares and the grant, cancellation, lapse or exercise of share options.

ERS returns must be submitted for both tax-advantaged and non-tax-advantaged arrangements where reportable events have occurred during the tax year.

Which arrangements are caught?

ERS reporting can apply to a wide variety of share-based arrangements, which include but are not limited to:

• EMI share options
• CSOPs, SIPs and SAYE schemes
• Growth shares
• Unapproved share options
• Direct acquisitions of shares by employees or directors

Importantly, companies may also have a filing obligation where shares are issued in connection with a business sale, group reorganisation, or management incentive structure. These can sometimes be overlooked as ERS reportable events.

Companies should also note that where a registered share scheme has ceased or is no longer actively used, ERS reporting obligations will continue until such time as ‘a date of final event’ has been provided and the scheme is properly ceased. Once a scheme is registered with HMRC, annual returns must be submitted on or before 6 July for each subsequent tax year unless and until the scheme is formally closed on HMRC’s ERS Online Service.

EMI notifications

If any EMI options have been granted within the last tax year, these must separately be notified to HMRC by the 6 July deadline to ensure they retain their tax efficient status.

Support with ERS filings

Birketts’ Employee Incentives team has a wealth of experience in managing the ERS process for our clients and can assist with the preparation and filing of ERS annual returns and any related queries. This support can help minimise the administrative burden, ensure filings are completed accurately and on time, and reduce the risk of any missed or late submissions. Please let us know if you would like any assistance in this regard and we would be happy to discuss how we can help.

Reassessing incentives: is your scheme still effective?

The preparation of an annual return provides a good opportunity for companies to reflect on whether their current share schemes or arrangements remain fit for purpose, align with the company’s current business objectives, and continue to deliver the intended incentive value to employees that was envisaged at the outset.

This includes considering whether any amendments should be made to any current EMI Plans to take advantage of the recent legislative changes (effective from 6 April 2026), most notably the extension of the period by which EMI options can be exercised and still retain their tax efficiency from 10 to 15 years. This extension can also apply retrospectively to existing EMI option grants, which will be particularly relevant for any EMI options which are nearing their 10-year expiry date. A contractual amendment to the option agreement terms may be necessary to bring this into effect, and it is therefore important that legal advice is sought to ensure no tax efficient treatment is lost.

Larger companies that were not eligible to operate an EMI Scheme previously may now qualify given the broader eligibility criteria which has been introduced. These changes include:

• an increase in the gross assets limit to £120 million;
• a higher employee threshold of up to 500 employees; and
• an increase in the company-wide cap on unexercised EMI options to £6 million. Please get in touch with our team if you would like to discuss how we can assist you to update your Plan.