HMRC can use ERS annual returns to identify errors or discrepancies in:
- Payroll withholding on share-based awards;
- Statutory corporation tax relief for employee share acquisitions; and
- Employees’ personal tax returns.
It’s therefore important that employers ensure their ERS annual returns are accurate and agree with their PAYE and NIC records. Where completing ERS returns highlights errors in the 2022/23 payroll compliance, any relevant PAYE should be recovered from employees on or before 4 July 2023 to minimise the risk of additional ‘tax on tax’ charges arising (see below).
Employers who fail to register or file on time will incur automatic penalties, and awards granted under tax-advantaged Save As You Earn (‘SAYE’ or ‘sharesave’) plans, tax-advantaged Company Share Option Plans (CSOPs) and tax-advantaged Share Incentive Plans could potentially lose their preferential treatment.
Some aspects of share plan reporting can present particular challenges, which can benefit from close attention in advance of the filing deadline. These are discussed below.