What are employment related securities?

If you’re an employer, you may have heard of Employment Related Securities. They can be a good incentive for your staff to remain with your business. In this article, we look at what Employment Related Securities are, the schemes that are available, plus the reporting rules that apply to them.

What are Employment Related Securities?

Employment Related Securities (ERS) refer to shares or securities like share options that are provided to employees – typically as part of their remuneration or as an incentive. The “employment-related” part means that the securities are given by reason of the individual’s employment or directorship.

Types of ERS scheme

ERS schemes can be tax-advantaged, but this isn’t always the case. Tax advantaged schemes include:

• Share Incentive Plans

  These allow you to get shares in any of four ways. Your employer can give you £3,600 of free shares per tax year. You can buy partnership shares out of your salary (to a maximum of the lower of £1,800 or 10% of your annual income). Your employer can give you two free shares for each partnership share you buy. You may also be allowed to buy more shares with your dividends. If you keep shares in your plan for five years, you don’t pay Income Tax or NI on their value. The exception is shares bought with your dividends, which become exempt from Income Tax after three years.

• Save as You Earn

  This allows you to save up to £500 per month and use the money to buy shares at a fixed price at the end of the savings contract. The interest and any bonus at the end of the scheme is tax free. You don’t pay Income Tax or NI on the difference between what you pay for the shares and their worth.

• Company Share Option Plan

  This gives you the option to buy up to £60,000 worth of shares (£30,000 if for options granted before 6th April 2023). If you buy shares within 3 to 10 years of them being offered, you don’t pay Income Tax or NI on the difference between what you paid for the shares and their real worth.

• Enterprise Management Incentives

  These can be offered only if the business has assets of £30 million or under, plus fewer than 250 employees. You can be given share options up to the value of £250,000 in three-year period. You don’t have to pay Income Tax or NI if you buy the shares for at least their market value at the time you were granted the option.

There are also various non-tax advantaged schemes you can choose from.

Which type of ERS should I offer?

The type of ERS you offer very much depends on your business’s circumstances. We strongly recommend you make an appointment with one of our expert accountants to talk through your options.

Reporting requirements for Employment Related Securities schemes

If you operate one or more ERS schemes, you need to submit an online return to HMRC by 6th July each year. This is the case even if it is a nil return. You also need to complete the relevant return template to submit with the return.

In the case of new schemes, you need to register them with HMRC. You will then be given a scheme reference number. You can then register the scheme using PAYE Online for employers. It’s important that your returns are accurate as HMRC are likely to cross-reference the information with employees’ Self-Assessment Tax Returns.

What happens if I don’t submit an ERS return?

If you miss the 6th June deadline, you automatically incur a £100 penalty. You’ll be fined a further £300 if your return is three months late. You’ll be hit with a further £300 at the six-month mark.

Need help with Employment Related Securities?

If you’d like any advice related to Employment Related Securities scheme, get in touch today. One of our friendly accountants would be very happy to help you.