If your company issued shares, options or growth shares, 6 July may matter even if no tax was due

A founder calls their adviser in July.

The company has not paid any bonuses. No one has exercised an option. No PAYE has been operated. No cash has moved. No one thinks there is a tax issue.

But six months earlier, the company issued growth shares to a senior employee. Or granted EMI options to a new CTO. Or transferred a small number of ordinary shares to a director as part of a founder reorganisation. Or promised equity to a US-based employee who was helping the business expand internationally.

The commercial position may be straightforward. The tax reporting position may not be.

For UK companies, the 6 July Employment Related Securities deadline is one of those annual compliance points that is easy to miss precisely because it does not always feel like a “tax payment” deadline. It is not necessarily about paying tax. It is about reporting securities, options and share arrangements connected with employment.

For the 2025/26 tax year, HMRC has confirmed that end-of-year Employment Related Securities returns must be submitted on or before 6 July 2026. A return or nil return is required for every scheme registered on HMRC’s ERS online service, and late filing penalties can arise if the deadline is missed.

This matters particularly for founders, start-ups, private companies, scale-ups, family companies and internationally mobile employees, because their equity arrangements are often informal, bespoke or commercially driven. They may not look like a traditional listed-company share plan. But they can still fall within the ERS reporting regime.

What are Employment Related Securities?

Broadly, Employment Related Securities are securities acquired because of a person’s employment. HMRC guidance explains that employment-related securities include securities acquired where an employer, or someone connected with the employer, gives an employee or another person an opportunity to acquire them. Common examples include shares and options over shares.

In practice, ERS reporting can be relevant where a company has:

• issued shares to a director, employee or consultant who is treated as an office holder or employee;
• granted EMI options;
• granted unapproved options;
• issued growth shares;
• issued partly paid shares;
• transferred founder shares;
• varied share rights;
• allowed shares to be acquired at undervalue;
• cancelled, released or amended options;
• operated a CSOP, SIP or SAYE arrangement;
• provided equity to internationally mobile employees;
• made a one-off award or gift of shares.

The important point is that ERS is not limited to formal “employee share schemes”. HMRC’s online ERS return guidance specifically states that employers operating ERS schemes must submit annual returns and that this includes one-off awards or gifts of shares.

That is where many private companies get caught.

They do not think they have a “scheme”. They think they simply issued shares to a key person, or tidied up the cap table, or gave a commercial incentive to a director. For ERS purposes, that distinction may not be enough.

Why 6 July 2026 is the key date

The ERS reporting deadline follows the end of the UK tax year. For the 2025/26 tax year, covering reportable events between 6 April 2025 and 5 April 2026, the filing deadline is 6 July 2026.

HMRC states that an ERS return must be submitted by 6 July following the end of the tax year, and that a late return may give rise to penalties.

For 2025/26, HMRC’s April 2026 ERS bulletin makes the point expressly: the end-of-year ERS return must be submitted on or before 6 July 2026. If the deadline is missed, HMRC says a late filing penalty will be issued.

This is not just an EMI deadline. It is not just a listed-company deadline. It is not just a payroll department deadline.

It is a deadline for any relevant ERS scheme or arrangement that has been registered, and potentially for non-tax advantaged arrangements where a reportable event has occurred and the scheme needs to be registered.

The practical trap: “nothing happened this year”

One of the most common errors is assuming that no filing is needed because there were no transactions in the year.

That assumption is dangerous.

HMRC’s guidance states that a return or nil return is required even where there have been no transactions, where a scheme was registered in error or duplicated, where the company did not receive an HMRC reminder, or where there was a one-off award.

That means a company may have a live ERS obligation even if the year was commercially quiet.

For example, assume a private company registered an EMI scheme in 2024/25, granted options that year, but did nothing further in 2025/26. If the EMI scheme remains live, the company should still consider whether an annual return or nil return is required.

The same point can arise where a non-tax advantaged arrangement was registered in a prior year but is still shown as open on HMRC’s ERS online service. If the arrangement has ended, the company should not simply ignore it. HMRC’s guidance refers to ceasing the scheme where appropriate, but outstanding returns may still be required up to the year in which the final event date falls.

EMI options: the filing obligation is not just the annual return

Enterprise Management Incentives, or EMI, remain one of the most valuable share incentive tools for UK growth companies. However, EMI compliance is unforgiving.

For EMI options granted on or after 6 April 2024, HMRC states that the EMI notification deadline is 6 July following the end of the tax year in which the grant is made. Therefore, for EMI options granted during the 2025/26 tax year, the EMI notification must be submitted by 6 July 2026. HMRC also confirms that an end-of-year return is required for all live EMI schemes by 6 July 2026.

This creates two separate points that founders often conflate:

First, the company must consider the EMI notification requirement for grants made in the tax year.

Secondly, the company must consider the annual ERS return obligation for the live EMI scheme.

Missing either can create unnecessary tax and compliance risk. For companies intending to rely on EMI tax treatment, poor administration can be as damaging as poor drafting.

Unapproved options and growth shares: do not assume “no tax due” means “no filing”

Many private companies use unapproved options or growth shares where EMI is not available, not appropriate, or not sufficient.

This may be because the company is too large for EMI, the relevant individual does not meet the EMI working time requirement, the company carries on an excluded activity, the individual is internationally mobile, or the commercial design requires a different equity instrument.

These structures can be perfectly legitimate. However, they are not compliance-free.

Non-tax advantaged schemes only need to be registered where there is a reportable event, such as acquiring or disposing of securities or assigning or releasing securities options. HMRC states that non-tax advantaged schemes should be registered by 6 July following the tax year in which the first reportable event happened.

In practical terms, if a company issued growth shares to an employee in 2025/26, or granted an unapproved option, or varied rights attaching to shares held by employees, it should review whether an ERS “Other” return is required.

The issue is not whether the company believes the event was taxable. The issue is whether the event is reportable.

This is a critical distinction. A transaction can be reportable even where the tax analysis ultimately concludes that no Income Tax or NIC charge arises.

Founder shares: the overlooked ERS issue

Founders often assume that ERS is only relevant once they start incentivising employees.

That is not always correct.

Founder shares can raise ERS issues where they are acquired in connection with employment or office holding. This is particularly relevant where shares are issued after incorporation, where founder equity is rebalanced, where a founder joins later, where shares are issued at undervalue, or where different classes of shares are created to reflect future value growth.

The problem is rarely the first day of incorporation when ordinary shares are subscribed at nominal value by the original shareholders. The problem is the later “commercial tidy-up” that no one reports because it is viewed internally as a founder matter rather than an employee tax matter.

Typical examples include:

• a technical co-founder receives shares after proving the product concept;
• a commercial founder receives shares after leaving employment elsewhere;
• a director receives additional shares after a funding round;
• a founder gives up shares and another founder receives them;
• an employee becomes a director-shareholder shortly before investment;
• growth shares are created for management before a sale process.

In each case, the ERS analysis should be documented. The company should identify who acquired what, when, why, at what value, and in what capacity.

If the person acquired securities because of employment or office, the ERS regime may be engaged.

Valuation evidence: the file HMRC will ask for later

ERS reporting is not only an administrative exercise. It is also a valuation and evidence exercise.

For private companies, the taxable value of shares or options often depends on market value at the relevant date. That can be difficult where there is no open market, no listed price and no recent third-party transaction.

This is especially important for:

• growth shares;
• partly paid shares;
• shares with restrictions;
• shares with ratchet rights;
• shares issued shortly before investment;
• shares issued shortly before a sale;
• options granted with a low exercise price;
• internationally mobile employees moving into or out of the UK.

A common error is to complete the ERS return as a data-upload exercise without maintaining a robust valuation file. That may appear efficient in July, but it can be expensive if HMRC asks questions later.

A sensible file should normally include:

• board minutes approving the award or option grant;
• the subscription or option agreement;
• the articles of association at the relevant time;
• the cap table before and after the event;
• any shareholders’ agreement;
• the valuation methodology used;
• evidence of any HMRC agreed valuation, where applicable;
• evidence of restrictions affecting value;
• details of any recent investment round or third-party offer;
• PAYE/NIC analysis where relevant;
• evidence supporting any internationally mobile employee apportionment.

The ERS return tells HMRC what happened. The valuation file explains why the tax treatment is defensible.

Internationally mobile employees: ERS can become cross-border very quickly

ERS is particularly sensitive where employees or directors work across borders.

The UK rules can interact with residence, duties performed outside the UK, remittance basis legacy issues, double tax treaty considerations, foreign payroll, overseas social security, and local securities tax rules.

HMRC’s ERS return guidance for “Other” employment-related securities includes specific fields dealing with internationally mobile employees and asks whether an adjustment has been made for amounts subject to apportionment for residence or duties outside the UK. HMRC guidance notes that, for internationally mobile employees, income derived from securities may be apportioned if the relevant conditions are met.

This is not just a compliance formality.

A UK company granting equity to an employee who has worked partly in the UK and partly overseas should consider:

• where the employee was resident during the grant-to-vesting or grant-to-exercise period;
• where duties were performed;
• whether PAYE withholding applies;
• whether foreign tax may also be due;
• whether a foreign tax credit may be available;
• whether social security contributions arise in the UK or overseas;
• whether the overseas country has its own share plan reporting rules;
• whether the individual has moved to the UK under the FIG regime or left the UK during the relevant period.

International mobility can turn a simple equity award into a multi-jurisdictional tax issue.

The penalties are automatic and can multiply

The ERS penalty regime is another reason the 6 July deadline should not be treated casually.

HMRC confirms that a £100 penalty is applied automatically where the end-of-year ERS return or nil return is not submitted by 6 July. Further automatic penalties of £300 can apply if the return remains outstanding three months after the original deadline, and another £300 if it remains outstanding six months after that date. HMRC guidance also refers to possible daily penalties of £10 per day if the return remains outstanding nine months after the deadline.

HMRC’s internal manual also states that the £100 penalty can arise even if the return is only one day late.

This matters for groups with multiple registered schemes. A company may have more than one ERS filing obligation: for example, one EMI scheme, one CSOP scheme and one “Other” arrangement. Penalties may therefore arise by scheme, not merely by company.

It also matters because paying the penalty does not solve the underlying filing failure. HMRC states that even where the initial penalty has been received and paid, the company must still submit the end-of-year return or nil return to meet its filing obligations and prevent further penalties.

Agents, reminders and responsibility

Another practical trap is assuming that HMRC will send a reminder or that the agent’s involvement transfers responsibility.

HMRC states that it will not remind companies to submit the ERS return. The return must be submitted by 6 July following the end of the relevant tax year, and if an agent is used, the company remains liable for penalties if the agent submits the return late.

This means ERS compliance needs to be built into the company’s annual governance calendar.

For private companies, the person best placed to identify ERS events may not be the payroll team. It may be the founder, CFO, company secretary, lawyer, tax adviser or corporate finance adviser who worked on the share issue.

That is why the ERS review should not start with the HMRC portal. It should start with the cap table.

A practical ERS review for July 2026

Companies should ask a simple question:

Did anything happen between 6 April 2025 and 5 April 2026 involving shares, options, securities or rights over securities connected with employees, directors or office holders?

If the answer is yes, the company should review whether an ERS return is required.

The review should cover the following areas.

1. EMI schemes

Check whether EMI options were granted in 2025/26. For EMI options granted in the 2025/26 tax year, the EMI notification deadline is 6 July 2026. Also check whether the EMI scheme is live and whether an annual EMI return or nil return is required.

2. Unapproved options

Check whether any non-tax advantaged options were granted, exercised, amended, released, cancelled or assigned. If so, the company may need to register and file under the “Other” ERS arrangement.

3. Growth shares

Check whether growth shares were issued, whether the rights were properly documented, whether the valuation position is supportable, and whether the acquisition was connected with employment.

4. Founder equity movements

Check whether any founder shares were issued, transferred, reclassified, forfeited or varied during the year. Pay particular attention to late-joining founders and director-shareholders.

5. Employee share acquisitions

Check whether employees or directors acquired shares directly, through a nominee, through a connected person, through a family member or through a trust.

6. Share rights and restrictions

Check whether any restrictions were imposed, lifted or varied. Restricted securities can create specific tax consequences and should not be ignored.

7. International employees

Check whether any employee or director receiving shares or options worked overseas, moved to the UK, left the UK, or performed duties in more than one jurisdiction.

8. Ceased or duplicated schemes

Check whether any ERS scheme is still open on HMRC’s system even though the company believes it has ended. HMRC guidance indicates that a scheme should be ceased where it is no longer operating or was registered in error, but outstanding returns may still be required for the relevant year.

9. Nil returns

Check every registered ERS scheme. If there is nothing to report, a nil return may still be required. HMRC’s guidance states that a return or nil return is required for schemes registered on the ERS online service.

10. Evidence file

Save a copy of the completed return, supporting templates, valuation evidence and submission receipt. HMRC states that the online ERS service does not save details of submitted returns and that companies will not be able to access them again after submission.

The real commercial issue: ERS compliance affects exits and funding rounds

ERS failures often come to light at the worst possible time.

Not when the option is granted.

Not when the growth shares are issued.

But during due diligence.

A buyer, investor or lender asks for copies of ERS returns, EMI notifications, valuation agreements, option agreements and cap tables. The company then discovers that a nil return was missed, an “Other” arrangement was never registered, an EMI notification was not filed, or the valuation file is incomplete.

At that point, the issue is no longer a modest HMRC penalty. It becomes a transaction risk.

A buyer may ask for a tax indemnity. An investor may require a pre-completion clean-up. Management may need to explain why the option plan was not administered properly. The company may need to quantify potential PAYE and NIC exposure. The timetable may slow down.

For a growth company, clean ERS compliance is part of being transaction-ready.

Common mistakes we see in practice

The most common ERS mistakes are rarely aggressive tax planning. They are administrative failures.

The recurring issues are:

• assuming that one-off share awards do not need reporting;
• forgetting to file nil returns for live schemes;
• missing the EMI notification deadline;
• registering the wrong type of ERS scheme;
• using an outdated HMRC template;
• filing without saving the submission file;
• failing to document valuation;
• ignoring internationally mobile employees;
• assuming that lawyers dealing with the share issue also dealt with HMRC reporting;
• assuming that payroll knew about the share transaction;
• failing to cease old schemes on HMRC’s ERS system;
• discovering the issue only during a funding round or sale process.

Most of these problems are preventable if the company runs an annual ERS review before 6 July.

What should companies do now?

For July 2026, the action point is practical and immediate.

Companies should review all equity-related events in the 2025/26 tax year and identify whether any ERS annual return, nil return or EMI notification is required by 6 July 2026.

In particular, founders and finance teams should review:

• the statutory registers;
• Companies House filings;
• board minutes;
• option grant documents;
• share subscription agreements;
• cap table changes;
• EMI valuation correspondence;
• employee joiner and leaver records;
• internationally mobile employee records;
• payroll records for any PAYE/NIC treatment;
• any legal advice relating to share issues or option grants.

The aim is not simply to file something by the deadline. The aim is to file the right return, under the right scheme, using the correct template, with a defensible technical and valuation file behind it.

Final thought

The 6 July ERS deadline is not just another compliance date.

It is a governance checkpoint for any company using equity to attract, retain or reward people.

For founders and private companies, the question should not be: “Did we have a tax bill?”

The correct question is: “Did anyone connected with the business acquire, hold, exercise, vary or dispose of shares, options or securities because of employment?”

If the answer is yes, the company should take the ERS position seriously.

Because in the world of employee equity, no cash does not always mean no tax reporting.

How Vectigalis Tax can help

Vectigalis Tax advises founders, private companies, UK groups and internationally mobile executives on Employment Related Securities, EMI, growth shares, unapproved options and cross-border employee equity issues.

We can assist with:

• ERS annual return reviews;
• EMI notification and annual return compliance;
• “Other” ERS reporting for unapproved options and growth shares;
• founder share issue analysis;
• internationally mobile employee share plan issues;
• valuation support and tax technical review;
• HMRC penalty mitigation and late filing clean-up;
• pre-investment and pre-exit ERS due diligence.

If your company has issued shares, options or growth shares during the 2025/26 tax year, the 6 July 2026 deadline should be reviewed now.

For UK and international tax advice, contact Vectigalis Tax at angelo@vectigalistax.co.uk or visit www.vectigalistax.co.uk.