Employment related securities and arrangements (480: Chapter 23)
Find out more about tax returns for employment related securities schemes and arrangements.
Annual returns
23.1
Companies which operate employment related securities (ERS) schemes and arrangements must make annual returns online.
Securities and securities options without tax and National Insurance contributions advantages
23.2
Chapters 1 to 5 of Part 7
Where employees receive securities (including shares) or options over securities (including share options) without tax and National Insurance contributions advantages’, the rules in Chapters 1 to 5 of Part 7 ITEPA 2003 apply. These extend to a range of chargeable events following the acquisition of securities. The meaning of ‘securities’ is at Section 420.
Operation of PAYE and National Insurance contributions
23.3
Section 698 Section 700
If the securities are Readily Convertible Assets (RCA), there may be an obligation to operate PAYE and National Insurance contributions on employment income from those securities. Employment-related securities are RCAs if they’re readily convertible into cash. Securities may also be deemed to be RCAs if they do not qualify for a Corporation Tax deduction in accordance with S1006 to S1012 CTA 2009. For more information about RCAs see CWG2 Employer Further Guide to PAYE and National Insurance contributions.
What information should be given to HMRC
23.4
Section 421J Section 222 ITEPA 2003
Information about the following events must be given:
- the acquisition of interests in securities by reason of an employee’s employment (whether or not any tax charge arises from their acquisition), including acquisitions giving rise to benefits chargeable under the ‘notional loan’ provisions of Chapter 3C, Part 7
- the grant of securities options, the acquisition of securities following the exercise of the option, the assignment or release of securities options and the receipt of benefits in money or money’s worth in connection with the securities options (Section 477)
- any chargeable event in relation to restricted securities (Section 426)
- any chargeable event in relation to convertible securities (Section 438)
- doing anything which gives rise to a taxable amount (counting as employment income) by reason of an artificial enhancement or reduction of the market value of securities (Section 446L)
- any event discharging a notional loan relating to securities acquired for less than market value (Section 446U)
- a disposal of securities for more than market value (Chapter 3D of Part 7)
Paragraph 23 Schedule 4, SS(C)R 2001
- the receipt of a benefit which gives rise to a taxable income counting as employment income under Section 447
If a joint National Insurance contribution agreement or National Insurance contribution election between the employee and employer has been operated to meet the cost of the employer’s secondary National Insurance contributions arising from securities option gains chargeable under Section 476 or an amount that counts as employment income under either Section 426 or Section 438, then you need to tell us on the online return.
Where there’s a chargeable event and PAYE is applicable, but the employer is unable to deduct the necessary sum from the employee, the employer has to pay over the shortfall to HMRC. If the employee does not reimburse the employer the amount of the shortfall within 90 days after the end of the tax year in which the notional payment is treated as made by the employer, see chapter 26 of this guide.
23.5
Section 421J(10)
Where the acquisition of shares gives rise to benefits chargeable under the ‘notional loan’ provisions of Section 446S, the ‘notional loan’ should be returned on forms P11D each year (as a beneficial loan) until discharged, paid off or the shares are sold.
When should the information be given
23.6
Section 421J(3)
Information relating to a reportable event must be given to HMRC before 7 July following the tax year in which the reportable event takes place.
Section 421J(5)
In addition to this 7 July deadline, if a notice is issued by HMRC requiring information about employment-related securities then it must be given by the date shown in the notice.
Who should give the information
23.7
Section 421L
Each of the following must make sure that the information is given:
- the employer
- any host employer (the person treated as the employer for PAYE purposes) of the employee
- the person from whom the securities, interests in securities or options were acquired
- the person issuing the securities (with certain exceptions, see Section 421L(6))
Once one of them gives the information this will be sufficient to satisfy the needs of the others.
Employees
23.8
Employees may need to give details of taxable amounts arising from employment-related securities to HMRC for self-assessment purposes.
See self-assessment guidance notes available on GOV.UK.
Securities and securities options given through third parties
23.9
Section 554A
There are special rules which may apply where arrangements use third parties to reward employees, including by way of securities and securities options. See chapter 1 paragraphs 1.16 to 1.23.
More information
23.10
Find out more information about tax advantaged share schemes in the Employee Tax Advantaged Share Scheme User Manual.
Detailed guidance on the tax rules applying to employment-related securities is in the Employment Related Securities Manual