Time to get ready: Employee share plan reporting 2025/26

For companies operating Enterprise Management Incentive (EMI) plans, 2025/26 marks the second year of the requirement to notify HMRC of EMI option grants by 6 July following the end of the tax year at the latest, rather than within 92 days of the date of grant.

Not all acquisitions of employment-related securities arise through formal employee share plans: for example, stand-alone share awards and acquisitions of shares or options linked to corporate transactions. Employers should continue to review activity across the organisation with their legal, reward, tax and company secretarial teams to identify all arrangements that may give rise to a reportable event.

How this reporting interacts with other tax compliance

HMRC use employers’ annual share plan returns to cross-check multiple areas of tax compliance, including:

• The PAYE, NIC and Apprenticeship Levy operated on share awards;
• Any corporation tax relief claimed in relation to employee share acquisitions; and
• Amounts reported by employees on their self-assessment returns.

Employers should therefore ensure that their employment-related securities returns are complete, accurate and consistent with their payroll records, corporation tax filings and global mobility data where relevant.

Share awards held by internationally mobile employees continue to be an area of complexity, particularly where the reporting, payroll withholding and corporation tax requirements do not completely align. Employers may wish to review their mobile workforce early to identify the reportable population and any potential issues.

Employers should also consider whether HMRC’s clarification of how NIC applies to certain incentives (including certain share-based awards) held by internationally mobile employees) could require adjustments to their ongoing payroll processes and, potentially, corrections to their historical NIC compliance position.

HMRC recently announced that they no longer require share awards covered by Appendix 4 STBV agreements to be reported in employment related securities return.

However, awards held by STBVs must still be reported if they give rise to UK income tax or NIC liabilities (e.g. awards granted during a period of UK residence before the relevant individual became covered by an Appendix 4 STBV agreement). This is a welcome easement, and avoids employers being required to report potentially extensive data to HMRC where no UK income tax or NIC is in fact due.

Broadly, ‘net-settled’ share awards are arrangements whereby the employer uses cash to cover the income tax due as withholding at the taxable event date and only issues sufficient shares to satisfy the net award. It can sometimes be difficult to confirm whether share awards are net settled, and it is therefore important to consider the settlement methodology that sits behind the operation of the share plan, as this is separate to the employee payroll requirements.

HMRC recently issued updated guidance on how to report net settled share awards which differs from previous tax years. In summary, for 2025/26 and subsequent years, for each net-settled award all the relevant information should be reported on one line in the return rather than on two. Details of the new reporting approach, and the information that HMRC expect employers to retain in case of an HMRC compliance review, are set out in our previous article.

Net settling share awards can have a significant impact on the available statutory corporation tax deduction. Employers should therefore review HMRC’s guidance on the corporation tax treatment of ‘cash cancelling’ or ‘net-settling’ employee share awards to identify the tax impacts and to ensure compliance.

Key areas for employers to consider for the 2025/26 reporting cycle include:

• Were any new plans or other reportable arrangements established during 2025/26 and, if so, is HMRC registration required?;
• Have any changes been made to existing UK tax-advantaged plans (i.e. SAYE, CSOP, SIP or EMI) that might impact their status?;
• Have you had any corporate transactions in the year that have impacted the share plans and how will this need reporting on the return?;
• Is the operation of each share plan clearly understood? For example:
  • Should conditional share awards (sometimes known as Restricted Stock Units or ‘RSUs’), be reported as securities options, and what are the wider tax and social security implications?;
  • Are the shares acquired subject to restrictions (this is common in private companies and certain overseas plans)?; and
  • Have any awards been ‘cash cancelled’ or ‘net settled’ (and if so, is the UK corporation tax relief calculation consistent with HMRC’s guidance)?; and
• Which reportable events occurred during the tax year, and which stakeholders (e.g. HR, payroll, tax, legal, company secretarial) hold the required data?

KPMG in the UK has extensive experience supporting companies to prepare, complete and submit their annual employee share plan returns; and to ensure compliance with the relevant PAYE, social security and corporation tax rules. We can also review prior years’ filings and assist with remediation where issues are identified. Please contact Lorna Jordan, Alison Hughes, Julia Moncur, or your usual KPMG contact to discuss how we can support your business.

For further information please contact:

• Lorna Jordan
• Alison Hughes