Share Scheme Returns: HMRC Penalties Now Being Issued for Late ERS Returns

Share Scheme Returns: HMRC Penalties Now Being Issued

Employers operating employee share schemes should be aware that HMRC is now issuing penalties for late Employment Related Securities (ERS) returns for the 2025/26 tax year.

ERS schemes are commonly used to reward, retain and incentivise employees through shares, share options and other forms of securities. However, with the annual reporting deadline having passed, businesses that have not submitted the required returns could now face increasing financial penalties.

What is the ERS reporting deadline?

All employers with a registered ERS scheme must submit an annual return to HMRC by 6 July following the end of the relevant tax year. Importantly, this requirement applies even where there have been no reportable transactions during the year.

In these circumstances, a nil return must still be filed.

What penalties apply?

HMRC automatically issues a £100 penalty when an ERS return is not submitted by the deadline.

Additional penalties may then be applied if the return remains outstanding:

• £100 initial late filing penalty
• £300 additional penalty after three months
• £300 further penalty after six months

Potential daily penalties where a return remains outstanding for nine months or more

These penalties can quickly escalate, particularly for businesses operating multiple share schemes.

What if a scheme has ended?

If an employee share scheme has been closed, employers must ensure the scheme is correctly terminated with HMRC. This includes entering the final event date and submitting the annual return for the tax year in which the scheme ceased.

A common misconception is that dormant or closed schemes no longer require attention. In reality, penalties can still arise where reporting obligations have not been properly completed.

What should employers do now?

If you have received a penalty notice, it is important to submit any outstanding ERS return as soon as possible. This applies even if you intend to appeal the penalty.

How Charlton Baker Can Help

Employee share schemes can deliver valuable tax-efficient benefits, but they also bring ongoing reporting and compliance responsibilities. Our tax specialists can help you review your ERS obligations, ensure filings are completed correctly and identify opportunities to maximise the effectiveness of your remuneration strategy. Call us now on 01380 723692 or email here.