Not reporting all share awards
Employment related securities are widely defined. It captures any shares or options whether bought for market value or not, that were acquired by virtue of the employee/director’s employment. Non-executive directors and some consultants can be caught. Options as well as shares are caught.

If a company buys back their own shares, which consequently results in the other shareholders who are employees or directors of the company gaining an uplift – this will be reportable.

Most employers register the allotment of shares following a capital event with Companies House, but fail to notify HMRC. Easily done.

Failing to file a ‘nil ERS return’
Employers who have registered share options (such as EMI) with HMRC but had no reportable events in the tax year such as the grant, exercise or surrender of a share option still need to file a nil ERS return.

If you have notified HMRC of a share option in the past and you still have options that have not yet been exercised, expired or lapsed, you will need to file a return.

Employers can stop reporting only seven years after the employee has left employment as at that point the securities cease to be employment related securities.

Filing a return for an event that is not an employment related security
There are other events where reports may not be required. These are:

Transfers of shares in the normal course of the domestic, family or personal relationships
Flat Management Companies
Members’ clubs (formed as companies)
Share for share exchange
Rights issues
Bonus issues
Scrip dividends
Dividend reinvestment plans (DRIPs)
Shares acquired independently by employees.

Real life horror
An employer assumed that their accountants were notifying HMRC of the grant of EMI options and shares to employees. The employer failed to follow up with the accountant.

The accountant was not familiar with the process of registering the scheme. Neither did the accountant realise that the employer needed to file an ERS return. This small miscommunication resulted in missed deadlines and an income tax bill of approximately £595,000 for loss of EMI status.

A company will be regarded as a large SME and able to obtain large companies relief if:

if the accounts have not been qualified;
it has fewer than 500 employees and/or:
an annual turnover not exceeding GBP 100m; and
a period-end balance sheet total not exceeding GBP 86m.
What expenditure qualifies as research and development?
There is no distinction between large and small SMEs for the purposes of determining what expenditure qualified as R&D for tax relief.

The expenditure that qualifies for R&D tax relief must:

Be revenue expenditure attributable to R&D,
Must relate to the trade of the business,
Must be done by the SME or on its behalf – this means that work by consultants and third parties may qualify for small SME R&D relief (expenditure by large SMEs on subcontracted R&D will not be eligible for relief unless the work is subcontracted to selected groups).
Capital expenditure might be covered by capital allowances. Also, if expenditure is covered by a grant or a subsidy no R&D relief can be claimed.

What kind of R&D expenditure relates to the business?
Again, without distinction for large and small businesses HMRC consider the following types of expenditure can qualify:

Cost of qualifying staff involved (qualifying staff are those who are directly and actively involved in the R&D including researchers or managers who plan, organise and carry out or support the R&D activity);

Consumable stores used (consumable stores include supplies directly employed in the R&D activity, essentially materials and equipment, but only where the equipment has a short useful life);

Certain subcontractor costs; and Payments to clinical trials volunteers.
There is no minimum spending requirement, nor a requirement that any part of research has to be carried out in the UK. The company does not need to own the intellectual property produced as a result of research – this means that it can be licensed.