Employment related securities bulletin 61 (November 2025)
Find out about how recent changes announced have an impact on employment related securities and what this means for you.
Private Intermittent Securities and Capital Exchange System (PISCES) and the legislation published at Legislation Day
The Private Intermittent Securities and Capital Exchange System (PISCES) is a new type of stock market for secondary trading of private company shares. On 26 August 2025, the Financial Conduct Authority gave the first approval to a market operator, the London Stock Exchange, to run a PISCES platform.
To make sure the tax system keeps pace with innovation in the wider economy, the government announced on 15 May 2025 that it would allow companies to amend Company Share Option Plans and Enterprise Management Incentives (EMIs) contracts to include a sale on a PISCES platform as an exercisable event.
The PISCES tax implications draft legislation and an updated PISCES technical note were published at Legislation Day on 21 July 2025. The technical consultation closed on 15 September 2025. The draft legislation is subject to change by Parliament and should not be considered as final.
The draft legislation allows for existing Company Share Option Plans and Enterprise Management Incentive (EMI) contracts to be amended now to allow a sale on a PISCES as an exercisable event, as if it were included in the contract at the point of grant. This makes sure that the tax advantages would not be lost as a consequence of the amendment.
It is important to note that the draft legislation, published on 21 July 2025, applies to Company Share Option Plans and EMI contracts that are granted on or before Royal Assent of the Finance Bill 2025 to 2026, and only those contracts can be amended accordingly.
For contracts granted after this date, they should include a sale on PISCES as an exercisable event in the relevant contract at the point of granting the option.
Companies would simply need to include PISCES into the contract as they would with any other exercisable event specified in the contract. How companies operate the provision remains at the company’s discretion, provided it is compliant with the scheme rules.
The legislation makes sure that employees are made aware of the change to their contracts to include PISCES. Companies will require written agreement from their employees to amend existing agreements. Alternatively, companies are permitted to simply notify those employees in writing of the amendment.
Application of the 2003 Memorandum of Understanding to managers’ shares
Paragraph 4.1(e) of the 2003 Memorandum of Understanding between the British Venture Capital Association (BVCA) and HMRC provides that one of the conditions for the Memorandum of Understanding to apply is that the managers’ shares must have no features that give them, or allow them to acquire rights, not available to other holders of ordinary capital.
Provided that all other conditions of the Memorandum of Understanding are satisfied, the Memorandum of Understanding will apply in circumstances where the managers’ shares (or ‘sweet equity’) have no or limited voting rights as compared to other classes of ordinary shares (‘strip equity’).
This is on the basis that the managers’ shares would not carry rights that are unavailable to other classes of ordinary capital.
Termination of a Share Incentive Plan (SIP) where employees cannot be traced
Where a Share Incentive Plan (SIP) is terminated, the trustees must make a reasonable attempt to trace any former employees who hold shares in the SIP.
Where a former employee (participant) cannot be traced, and a direction or instruction made by the participant permits, the trustee may donate the shares (or their sale proceeds) to:
- charity
- the plan company to hold on bare trust for the participant
Such a direction from a participant set out in the Participation Agreement would be compatible with paragraph 72(3) Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and compliant with paragraph 11.
However, there may be tax implications if the shares have not been held in the trust for the relevant period to qualify for tax exempt status.
Where there is an Income Tax charge and the shares are readily convertible assets, the trustees would have to make sure that the tax and any National Insurance contributions due are paid through PAYE.
The trustees are empowered to dispose of a participant’s SIP shares to comply with the PAYE obligations. Where there is an Income Tax charge and shares are not readily convertible assets, a participant would report this through Self Assessment. If the participant cannot be traced, but Self Assessment applies, the trustees should seek advice by emailing shareschemes@hmrc.gov.uk.
Employment related securities reporting obligations when personal representatives exercise share options after an employee’s death
Following a query raised at the Share Scheme Forum in July 2025, we can confirm that no employment related securities reporting obligations arise under Part 7 of Income Tax (Earnings and Pensions) Act 2003 (ITEPA) where an employment related securities option is exercised after the employee’s death by their personal representatives.
This also applies to the subsequent acquisition of shares by the personal representatives and their transfer to beneficiaries under the will.
This conclusion covers the following events being undertaken by virtue of a will or intestacy:
- the transfer of the option to the personal representatives by operation of law on the employee’s death
- the acquisition of shares by the personal representatives on exercising the option
- the transfer of those shares by the personal representatives to the beneficiary or beneficiaries under the will
Penalty appeal process — reminder
Late filing penalties apply to employment related securities annual returns submitted after 6 July following the end of the tax year.
If you’ve received a late filing penalty, you must submit your annual return or a nil return as soon as possible.
If your scheme has ceased, you must:
- enter the final event date online
- submit either a return or a nil return for the ceased scheme
Taking these actions may help you avoid further penalties. You should do this even if you have already submitted, or plan to submit, an appeal against the penalty.
HMRC will not be able to respond to your appeal if you have not submitted an annual or nil return for the relevant tax year.
Read about how to deal with an employment related securities penalty.
Employer’s National Insurance contributions joint elections — reminder of the changes to the administration process
From 1 May 2025, if employers use the pre-approved National Insurance contributions election form template on gov.uk, they no longer need to submit the form to HMRC for approval.
Employers who create their own employer’s National Insurance contributions election form must still send it to HMRC for approval.
Read about transferring employer’s National Insurance to employees.
Employment related securities scheme registration process — reminder
Before you can register an employment related securities scheme, you must first be registered as an employer with HMRC. If you’re not yet registered, note that obtaining your PAYE reference number can take up to 30 working days.
Once you receive your PAYE reference, you’ll need to enrol for the PAYE online service and activate it to proceed with employment related securities registration.
Read about how to register an employment related securities scheme and what to do if you missed the deadline.
Saving copies of your end of year returns or notifications — reminder
You will not be able to access a copy of what you submit through the online service once you have submitted it.
You can view the date of your last return or notification submission by logging into your online account and navigating to the ‘View Schemes and Arrangements’ page.
Before submitting your employment related securities return or EMI notification, make sure to save a copy for your records.
If you’re entering details online, consider taking screenshots of each page, including the confirmation page.