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How to file HMRC notifications for unapproved options

How to complete the file for initial and annual notifications and when they're needed.

Last updated: 06/07/2026

TL;DR: This guide explains how to notify HMRC about unapproved options granted to UK employees or directors, ahead of the 6 July deadline. It covers registering your scheme for the first time, when a nil return is enough, and how to complete the spreadsheet fields we can't pre-populate for you.

When you grant unapproved options to UK employees or directors, you must submit an annual notification to HMRC by 6 July following the tax year in which the options were granted. You can download the file template and view HMRC's guidance notes here.

Contents📋

A few terms you'll see

These come up throughout the guide, so we've explained them once here:

  • ERS (Employment Related Securities): HMRC's term for shares and options given to employees or directors because of their employment. Unapproved options are reported through HMRC's online ERS service.
  • Annual notification (or annual return): the end-of-year report you must submit to HMRC by 6 July for each registered scheme, covering the previous tax year.
  • Nil return: a simplified online submission confirming there's nothing to report for the year. No spreadsheet needed.
  • Reportable event: anything that must go on the return; for example the grant, exercise, or cancellation for money/value of options.
  • NIC election or agreement: an arrangement where the employee agrees to pay the employer's (secondary) National Insurance contributions due on their option gain. More on this below.
  • Readily convertible assets: shares that can be easily turned into cash; for example, shares sold immediately during an exit event.

Registering your scheme for the first time

This is for you if you've granted unapproved options but haven't yet registered the scheme with HMRC.

What you'll need to do

  • Register your scheme with HMRC — this guide walks you through it.
  • Complete the notification through the ERS system — this guide will help.
  • When asked to upload a spreadsheet, download it from the Annual notifications area of the platform.
  • Fill in the first sheet, Other_Grants_V4. All 4 columns should be completed. This is fairly self-explanatory and is entered in aggregate for each grant date.

What happens next

  • Once submitted, your scheme is registered and you'll need to file an annual notification every year by 6 July, even if nothing has happened (see below).

Subsequent annual notifications

Which route you take depends on whether anything reportable happened in the previous tax year.

If nothing reportable happened

If no options were granted, exercised, or cancelled for money/value in the previous tax year, you only need to submit a nil return.

If there was activity in the scheme

This is for you if options were granted, exercised, or cancelled for money/value during the tax year.

What you'll need to do

  • Follow this guide to file through the ERS system.
  • When asked to upload a spreadsheet, download it from the Annual notifications area of the platform.
  • We pre-populate most of the answers, but please double-check they're all correct, and complete the fields we can't fill in for you (see "Completing the trickier fields" below).

What happens next

  • Once you've checked and completed the spreadsheet, upload it as part of your ERS submission before 6 July.

A note on cancelled options

As we can't know whether any individual employee received money or value for options released (including exchanges), cancelled, or lapsed, we add all cancellations to the annual sheet. For safety, we default to No for the answer on the Other_Options tab, Question 38: "If securities were not acquired, was money or value received on the release, assignment, cancellation or lapse of the option? (yes/no)".

You can remove any cancelled options from the sheet if no value was exchanged. If you choose to leave them on the sheet, there's no impact.

Completing the trickier fields

Here's a quick rundown of the trickier questions and mandatory fields that might not be pre-populated (not all questions apply to each tab):

Is the event in relation to a disclosable tax avoidance scheme? For a normal unapproved option, no.

National Insurance number: we pre-populate all the NI numbers saved on Vestd, but please add any that are missing. This is a mandatory field.

PAYE reference of employing company: again, we pre-populate this if we know it — please enter the company's PAYE number if not. This is also a mandatory field.

Were the options exercised? Yes if exercised; no if cancelled.

If securities were acquired, what was the Market Value on the date of acquisition? What was the Actual Market Value of the shares at the time of exercise? Please note: If the shares are unrestricted or an election was made to disregard all restrictions (ITEPA s431), enter the unrestricted market value (UMV) of the shares at the time of exercise.



HMRC valuation reference: if HMRC acknowledged your valuation, enter the reference number given. This is mandatory (only if a reference was given).

If the shares were acquired, total deductible amount excluding any consideration given for the securities: typically £0, unless a charge was made for the grant of the option or other expenses were incurred by the employee or director. Don't include the exercise price, Income Tax, or any employer's NICs the employee agreed to pay under a NIC election or agreement.

Was PAYE operated? If the shares were readily convertible into cash (i.e. immediately sold, like during an exit event), both Income Tax and National Insurance are due on the difference between the exercise price and the sale price. This must be paid by the company via PAYE then reimbursed by the shareholder within 90 days. If this is the case, enter "Yes". If not, enter "No", as this is a mandatory field.

Was a National Insurance contributions election or agreement operated? (yes/no) This question is mandatory. Normally, when options are exercised over readily convertible shares, the company owes employer's (secondary) National Insurance on the option gain. However, the company and the employee can agree — or jointly elect — to transfer that liability to the employee. This is often built into the option agreement itself. Where the employee bears the employer's NICs this way, they get an Income Tax deduction equal to the amount transferred when working out their taxable gain. "Operated" means the employer's NICs were actually recovered from the employee under an election or agreement already in place — not merely that a document exists.

In practice: answer "Yes" only if the employer's NICs on the exercise were actually recovered from the option holder under a joint election or agreement. If there was no such election or agreement, or no NICs were due (for example because the shares weren't readily convertible into cash), answer "No".

What happens after you file

  • HMRC will confirm your submission through the ERS service — keep the acknowledgement reference for your records.
  • You'll need to file again by 6 July next year, even if it's just a nil return.
  • If you spot a mistake after filing, you can submit an amended return through the same ERS service.

Need help?

If you're unsure about any field on the spreadsheet, double-check against HMRC's guidance notes or get in touch with our team — we're happy to point you in the right direction.

FAQs

When is the deadline? 6 July following the end of the tax year in which the reportable event happened. Late filing triggers automatic HMRC penalties, starting at £100.

Nothing happened in my scheme this year, do I still need to file? Yes. Once a scheme is registered, you must file every year. If there were no reportable events, a nil return is all you need.

Where do I find the spreadsheet? In the Annual notifications area of the platform. We pre-populate most of it, you just need to check it and fill in the gaps.

Should I answer yes or no to the NIC election question? Answer "Yes" only if the employee actually paid the employer's National Insurance under a joint election or agreement between the company and the employee. If no election or agreement exists, or no NICs were due, answer "No". Don't leave it blank, it's a mandatory field.

We cancelled some options this year but no money changed hands, do they need to be on the return? Not necessarily. We include all cancellations on the sheet for safety (defaulted to "No" for Question 38), but you can remove any cancelled options if no value was exchanged. Leaving them on the sheet has no impact either way.

Can I leave non-applicable fields blank? If a question doesn't apply or isn't mandatory, leave it blank. Don't enter "N/A" or "not applicable", HMRC will reject the file.

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