Employment-Related Securities Reporting: Key Deadlines 2025

In the UK, any employer that provides employees or directors with shares or securities—whether as part of a formal share scheme or through ad hoc arrangements—is required to report these events to HM Revenue & Customs (HMRC) via an annual Employment-Related Securities (ERS) return. These rules apply regardless of whether the company operates a registered share scheme or not.

With increasing use of share-based rewards as part of incentive structures—particularly in growth-focused and owner-managed businesses—the importance of meeting ERS obligations accurately and on time is more relevant than ever.

In 2025, HMRC has reminded employers of the 6 July deadline for submitting ERS returns covering the 2024/25 tax year. Additionally, from 1 May 2025, a key simplification has been introduced for companies making a joint election to transfer National Insurance Contributions (NIC) liabilities to employees under share-based arrangements.

These updates, while technical, are crucial for businesses offering equity incentives or employee share options, and failure to comply can result in financial penalties and reputational risk.

 

1. ERS Reporting Deadline: 6 July 2025

 

The ERS return is a mandatory online submission that must be filed by any company that has made available any form of employment-related securities or options during the relevant tax year, ending 5 April.

Examples include:

 

• Granting of options under EMI or non-tax-advantaged schemes
• Vesting of conditional shares or restricted stock units
• Transfer of shares to employees or directors, whether paid or unpaid
• Changes to previously granted equity arrangements

 

The return must be filed via HMRC’s online system by 6 July 2025, regardless of whether the company has operated a formal share scheme. If no such activity has taken place but a scheme is registered, a nil return is still required.

 

Penalties for Late or Inaccurate Filing

 

• Initial penalties of £100 for failure to file by the deadline
• Further penalties of £300 after 3 months, and another £300 after 6 months
• Daily penalties may apply for prolonged non-compliance
• Interest and additional charges can be imposed where underpaid tax or NIC is discovered

 

2. Simplification of NIC Election Process: Effective 1 May 2025

 

In cases where employers grant share options or securities that trigger a National Insurance liability, they may enter into a joint election with the employee to transfer the employer’s NIC liability to the employee. This is typically used where the employer wants to preserve cash or align tax treatment with the employee’s benefit.

As of 1 May 2025, the process has been simplified. When using HMRC’s standard election form, there is no longer a requirement for HMRC pre-approval before the agreement takes effect.

This is a significant administrative relief. Previously, even standard elections required submission and clearance from HMRC, adding time, uncertainty, and delays to equity-related arrangements—particularly in fast-moving corporate transactions or funding rounds.

Now, once the joint election is signed by both parties and retained in company records, it is considered valid without prior HMRC review, provided the correct form and procedures are followed.

 

What Does This Mean for Me? – Implications for UK SMEs and Businesses

 

1. Increased Risk from ERS Non-Compliance

 

Many small businesses mistakenly assume that ERS returns apply only to formal share schemes, but this is incorrect. Any share transfer or option grant to an employee or director must be reported. This includes one-off arrangements or gifting of shares during funding events or restructures.

For SMEs offering growth shares, founder equity, or employee incentives, it’s essential to track all such events during the tax year and ensure they are correctly captured in the ERS system.

Failure to file, or filing late, not only triggers penalties—it can also raise red flags for HMRC reviews, which could lead to broader tax audits or reclassification of schemes.

 

2. Practical Relief for Equity Planning and Start-Ups

 

The simplification of the NIC liability transfer election is particularly helpful for start-ups and scale-ups. These businesses often use equity as a key part of compensation strategy, but may want to transfer the employer’s NIC to the employee when the shares vest—especially where cash is tight.

By removing the need for HMRC pre-clearance on standard elections, the process becomes faster, more predictable, and more aligned with commercial timetables, such as funding rounds or exit events.

It also provides greater legal certainty for company secretaries, advisers, and tax agents, as they can now operate under a standardised and streamlined process with reduced bureaucracy.

 

3. More Compliance Planning Required

 

While the new rules reduce friction, they also increase the importance of internal controls. Companies will need to:

 

• Ensure their payroll, HR, and finance teams are aligned on what constitutes an ERS event
• Maintain accurate records of share grants, vesting, and transfers
• Use HMRC’s online service to file returns on time and in the correct format
• Ensure NIC elections are correctly signed and retained before taxable events

 

Working with an accountant or tax adviser experienced in employment-related securities is highly recommended to avoid falling foul of reporting requirements.

 

Conclusion

 

The ERS reporting regime continues to be a key compliance obligation for UK employers engaging in equity-based remuneration. The simplification of NIC elections as of May 2025 is a welcome improvement, but the onus remains on businesses to track, report, and retain documentation effectively.

For SMEs and growing companies offering share-based pay or incentives, these updates are a timely reminder to integrate ERS awareness into their finance and HR processes. Proactive planning now will avoid penalties, maintain credibility with HMRC, and help preserve the value of equity-based reward structures for both employers and employees.