In brief
Following the end of the UK tax year on 5 April 2026, annual Employment-Related Securities (ERS) returns may now be filed online with His Majesty’s Revenue and Customs (HMRC). All companies with open share plan registrations with HMRC are required to submit an annual return, even if it is a nil return (i.e., even if there has been no share plan activity during the 2025 to 2026 tax year).
By way of reminder, non-tax-advantaged awards and plans must be reported on the “Other” template. There are separate templates for each of the tax-advantaged Company Share Option Plan (CSOP), Save As You Earn (SAYE), Enterprise Management Incentive (EMI) and Share Incentive Plan (SIP) plans. If the template does not match the plan registration, the submission will be rejected.
HMRC have introduced two major changes which may require addressing in the 2025-2026 tax year:
- Updates to the rules applying to short term business visitors
- Changes to the reporting requirements surrounding net settlement agreements
The deadline for submission for the 2025 to 2026 tax year is Monday 6 July 2026. Practically, companies should work towards a filing deadline of Friday, 3 July. HMRC will not send companies a reminder to file their share plan returns. Submitting a late return may result in late filing penalties.
The annual share plan return will highlight to HMRC where net settlement is being used. We are increasingly seeing HMRC challenge the corporation tax deduction position of companies using net settlement procedures. Given HMRC challenges, we would urge you to get in touch with us if your company is using net settlement.
In depth
Comments
An annual return needs to be submitted by 6 July 2026 for the 2025 to 2026 tax year for each share plan that has been registered with HMRC online (unless it was de-registered in a previous tax year). The return will need to cover all reportable events between 6 April 2025 and 5 April 2026. Non-tax advantaged equity awards are reported under the “Other” share plan registration — please see here for the “Other” share plan return to be used for the 2025 to 2026 tax year.
Reportable events include but are not limited to:
- For options — the grant (including on a rollover/assumption), exercise, assignment or release for consideration (not a lapse for nil consideration) or the receipt of a benefit in connection with the option.
- For Restricted Stock Units (RSUs)/conditional share awards — the grant, vesting, assignment or release for consideration (not a lapse for nil consideration) or the receipt of a benefit in connection with the award.
- For employee purchase plans — the purchase of shares (and potentially the grant of purchase rights).
Common issues
The return needs to be filed by the entity that registered the plan with HMRC using the plan’s unique reference number. If you do not regularly access HMRC’s website, now is the time to relocate your log-in details or identify the person who has access. HMRC does not have a defined process in place to allow companies to recover lost details, so ahead of the return season it may be worth adding more than one administrator to your Government Gateway account, just in case your primary administrator is not available to log in and submit your returns before the deadline. To set up a secondary administrator, log into your HMRC business tax account and follow the guidance to add a team member.
The template annual return forms and guidance on how to complete them can be found here.
Before submission, files uploaded to HMRC’s website will be checked for formatting errors by HMRC’s checking service. The files are format sensitive and so companies are encouraged to check their files in advance of making the submission. This can be done here.
The website that HMRC introduced to report on the service availability of HMRC’s website and any planned downtime remains available. It can be accessed here.
HMRC guidance
Short term business visitors reporting requirements
HMRC has advised in its February 2026 bulletin that it will no longer require companies to report non-tax advantaged ERS data for employees classified as short term business visitors (covered by an EP Appendix 4 arrangement). This applies for all previous and future tax years. ERS reporting obligations will remain in rare scenarios where UK income tax and National Insurance Contributions (NICs) would be due.
Net settlement
Specific reporting is required if your company is using “net settlement” withholding arrangements, rather than “sell to cover” withholding arrangements.
HMRC has advised in its January 2026 bulletin that the requirement to provide two lines of information when reporting net settlement on the ERS return has been removed — the reporting requirement has been reduced to one line.
In a net settlement scenario, the gross number of shares should now be reported in Q31 of the ‘Other_Options_V4’ tab. In Q39 the value of the shares which were net withheld should be reported. In a sell-to-cover scenario, the gross number of shares would be reported in Q31, and Q38 and Q39 would be left blank.
Please note that we are still seeing HMRC challenge the corporation tax deduction position of companies using net settlement procedures, and it should not be assumed that these changes indicate HMRC relaxing its position. Companies will still need to report where they are using net settlement within the revised one-line entry in the ERS return.
Please note that HMRC is denying companies full statutory corporation tax deductions where net settlement is used. Given HMRC challenges, we would urge you to get in touch with us if your company is using net settlement.
Tax advantaged plans
Tax advantaged equity awards are reported under separate specific returns (with a separate return needed for each separate tax advantaged plan). We have attached links for each tax advantaged plan, as follows:
Share Incentive Plan — here
Sharesave Plan (SAYE) — here
CSOP — here
EMI — here
Companies should not report non-tax advantaged equity awards under the specific tax advantaged returns (even though the names of some of these plans seem generic).
If you need any assistance with the preparation of your annual share plan return, please do not hesitate to contact a member of your Baker McKenzie team.
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Archie Capon, Trainee Solicitor, has contributed to this legal update.