ERS: What They Are & Why They Matter for Limited Companies
If you’re a company owner thinking about giving or selling shares to your employees, there’s an important HMRC rule you need to know about and we call it Employment Related Securities (ERS).
It sounds technical, but in plain English, it simply means:
Any shares or share options that are given to someone because of their employment.
Why Does ERS Matter?
When you give or sell shares to employees (or even directors), HMRC is interested, because those shares are considered part of the reward for their work. And just like salary or bonuses, there could be tax implications.
If you don’t follow the correct reporting and valuation rules, you risk:
- Unexpected tax bills for the employee and the company
- Penalties for late or incorrect reporting
- Problems later if you sell the company or seek investment
Examples of ERS in Action
- Giving shares to a key employee as a reward for their contribution
- Selling shares to an employee at less than the market value
- Share option schemes where an employee is granted the right to buy shares in the future
Even if the shares are gifted, or sold at a discount, HMRC still sees this as a benefit that could be taxable.
What Needs to Be Reported?
You must report to HMRC any time shares or options are given to employees or directors, including:
- Share awards or gifts
- Share options granted, exercised, or released
- Restricted shares that might become more valuable over time
Reports are made via the Employment Related Securities (ERS) online service, and need to be filed by 6 July following the end of the tax year in which the shares were given or sold.
Are There Tax-Efficient Alternatives?
Yes, there are approved share schemes like:
- Enterprise Management Incentives (EMI)
- Company Share Option Plans (CSOP)
These offer tax advantages for both the company and the employee but they still need to be reported via ERS.
How Brisan Can Help
At Brisan, we help limited companies:
- Navigate the tax implications of issuing shares to employees
- Ensure shares are properly valued to avoid tax surprises
- Handle the ERS online reporting to keep you compliant with HMRC
- Explore tax-efficient share schemes tailored to your business
Thinking About Giving Shares to Employees?
Before you do, speak to us. We’ll help you structure it correctly, manage your tax risks, and keep HMRC happy.
👉 Contact Brisan today for advice on Employment Related Securities and employee share schemes.
