U.K. employers must register any new reportable arrangements and file all Employment Related Securities (ERS) annual returns with the U.K. tax authorities on or before 6 July 2026.1
Employers have an annual obligation to report any notifiable events that occur in relation to ERS (i.e., shares or other securities that are acquired by reason of employment), or rights to acquire ERS (such as employee share options or restricted stock units).
If employers do not meet their annual obligation to report notifiable events that occur in relation to ERS during a U.K. tax year (a U.K. tax year runs from 6 April to 5 April) and file related returns for 2025/26 by 6 July 2026, automatic penalties will arise.
Employers must be confident that the information provided in the annual returns is complete and correct and can be reconciled with their payroll and corporation tax compliance positions.
It is recommended that employers consider preparing for ERS annual returns now, as this will provide sufficient time, if needed, to make any necessary corrections to errors or omissions.
In summary, employers have an annual obligation to report any of the following events that occur in relation to ERS during a U.K. tax year:
These obligations also apply to certain other reportable events involving shares or other securities which are acquired, or treated as having been acquired, by reason of employment. This applies regardless of where the issuing company is incorporated, resident, or listed.
The entity whose shares are under award and a U.K. ‘host’ employer also have an ERS filing obligation. If an employer makes a return, however, this discharges the joint and several liability of any other entity.
Events that occur outside a formal employee share plan, such as an acquisition of shares or grant of options during a transaction, can also give rise to reporting obligations.
It is important to identify the settlement methodology for awards. The reporting treatments of net-settled, cash-cancelled, and equity-settled awards are different.
If no reportable events occur during a tax year in relation to a registered plan, a ‘nil’ return must be submitted.
HMRC have announced2 that they no longer require share awards covered by an Appendix 4 STBV agreement (which, broadly, relaxes U.K. employer reporting obligations for non-resident employees where certain conditions are met) to be reported in ERS returns. This reverses HMRC’s previous position.3
However, awards held by STBVs that are not covered by an Appendix 4 agreement must still be reported (e.g., awards granted during a period of U.K. residence before the relevant individual became covered by an Appendix 4 STBV agreement).
HMRC’s updated guidance4 specifically emphasises that an ERS reporting obligation remains where the relevant employee is covered by an Appendix 8 STBV agreement (which, broadly, allows for annual rather than monthly employer reporting and payroll withholding for non-resident employees where certain conditions are met).
HMRC’s updated guidance5 also notes that if individuals who work for a U.K. EOR under the direction of its overseas client participate in that client’s share plan, ERS reporting obligations arise for the EOR, in addition to any ERS reporting obligations that might arise for the issuer of the relevant securities.
Separate reporting obligations arise in relation to non-tax-advantaged plans (or other arrangements), and each type of U.K. tax-advantaged employee share plan. Plans that attract non-U.K. tax advantages, such as U.S.-qualified employee stock-purchase plans or Irish Approved Profit-Sharing Schemes, are ‘non-tax advantaged’ for U.K. tax and reporting purposes.
For non-tax-advantaged arrangements, no reporting obligations should arise in relation to ERS awards held by individuals who were not U.K. resident and had no U.K. duties throughout the relevant vesting period. However, subject only to the ‘Appendix 4’ exception, share-based awards should be reported where the employee had U.K. duties, or were covered by the U.K. social security system, at any point over the vesting period of the relevant award.
Employers should take particular care to ensure they identify any reportable events that arise in connection with STBVs to the U.K. because, as these employees are generally subject to relaxed employer reporting obligations, an ERS reporting obligation could be overlooked. Where internationally mobile employees’ awards are reportable on both a U.K. ERS return and an equivalent overseas return, employers should make sure that the relevant entries on each country’s return are consistent with each other.
Where a review determines that awards are net-settled, wider discussions should be undertaken to ascertain the impact on U.K. corporation tax deductions. This is an ongoing area of increased focus for HMRC.
Organisations that extend participation in their own share plans to employees of any U.K. EOR they utilize should ensure that the EOR is aware of, and discharges, its ERS reporting obligations correctly, as this is another area of recent HMRC focus.
Employers should review their ERS return registration status to confirm which registrations (if any) were made in previous years and whether any additional registrations are required.
As new registrations can take time, it is preferable to begin the process as soon as possible so that all relevant submissions can be made on or before 6 July 2026.
Employers are advised to consult their qualified tax professionals to confirm their reporting obligations and understand the registration process. They may also wish to seek assistance with completing and submitting the annual ERS returns. However, registration must be performed by the employer, as agents cannot register a plan or other arrangement on the employer’s behalf.
ERS return templates and associated HMRC guidance are available by clicking here (HMRC website "Register your employment related securities scheme"). Employers should download and review any required return templates as soon as possible to confirm whether they hold the information required to complete and submit those returns by the deadline.
Where a plan or other arrangement is registered with ERS Online Services, but the employer does not submit an ERS return by 6 July 2026, an automatic penalty of GBP 100 per registration will arise.
Additional penalties will arise where submissions remain outstanding by 6 October 2026 (GBP 300) and 6 January 2027 (a further GBP 300). HMRC can impose additional penalties for any returns that remain outstanding after 6 April 2027.
Registrations that are no longer required should be closed to avoid penalties for inadvertent non-filing.
Cash-cancelled and net-settled share-based awards – where employees acquire cash rather than shares in respect of some or all of the award – must be specifically reported in the ERS return. Identifying and correctly reporting such awards can be challenging, and it is important to appreciate that cash cancellation or net-settlement can affect the availability, timing, and quantum of corporation tax relief in respect of an employee share award.
Share-based awards held by internationally mobile employees, where reporting, payroll, and corporation tax requirements are not completely aligned, can present challenges. Employers should review their mobile workforce carefully, paying particular attention to STBVs to the U.K., to identify any such difficulties and determine how these should be addressed.
Early preparation of the returns gives employers more time to make any required corrections to end-of-year payroll withholding. It should also allow any historical errors to be identified and proactively managed through voluntary disclosures to HMRC.
Organisations that utilize EORs to employ workers in the U.K., and which extend participation in their own share plans to those EORs’ employees, should ensure that the EOR discharges its associated ERS reporting obligations correctly.
Employers that have any concerns about their obligations and/or the next steps to take, should reach out to their usual global reward professional or a member of the global reward team with KPMG LLP in the U.K. (see the Contacts section).
Employers should review their ERS return registration status to confirm which registrations (if any) were made in previous years and whether any additional registrations are required.
1 For more information, see “Register your employment related securities scheme” on the U.K. government’s website.
2 HMRC, Employment related securities bulletin 64 (February 2026), “Employment Related Securities (ERS) reporting requirements for short term business visitors (STBV)”.
3 See our previous GMS Flash Alert, United Kingdom – HMRC Clarifies Share Plan Reporting Obligations for Certain Short Term Business Visitors (12 August 2025).
4 HMRC, Employment Related Securities Manual ERSM140030.
5 HMRC, Employment Related Securities Manual ERSM140070.
The information contained in this newsletter was submitted by the KPMG International member firm in the United Kingdom.
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