HM Revenue and Customs Brief 55/08
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Issued 14 November 2008
Change of SME (Small and Medium Enterprise) status for companies making
claims under the Research & Development (R&D) and Vaccine Research Relief (VRR)
This Brief announces a change of our interpretation which will apply where a
company's SME status alters, due to its being taken over by, or merging or
becoming associated or linked with, any other enterprise on or after 1 December
2008. The change will affect companies making tax relief claims under the
Research & Development and Vaccine Research Relief schemes.
It has been the practice to accept that if a company is an SME at any time in
an accounting period then, for the purposes of the R&D and VRR schemes, it will
be treated as an SME for the whole of that accounting period. For example, if an
SME is taken over by a large company or merges with another SME to form a large
company, it retains its SME status until the end of the relevant accounting
Our interpretation to apply where a change of status of an SME occurs on or
after 1 December 2008
Where a company loses its SME status on or after 1 December 2008 as a result
of being taken over by a large enterprise (which can be a single large company,
or a collection of smaller entities which when taken together are regarded as
large) it will be regarded as a large company for R&D and VRR purposes for the
whole accounting period in which the change occurred.
This is a separate situation from a where an SME "organically" becomes large
by growing so that it exceeds the staff or financial thresholds. In such a case,
there is a transition period which allows SME status to be retained until the
limits have been exceeded for two consecutive accounting periods. No such
transition period applies where the loss of SME status is due to merger,
takeover or linking.
Where a large company decreases in size or demerges from a larger group of
entities, it will not attain SME status until it has met the SME staff number
and financial thresholds for two consecutive accounting periods.
Our change of interpretation will be reflected in our published guidance: the
Corporate Intangibles and Research and Development manual at CIRD 92000.
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Article Published/Sorted/Amended on Scopulus 2008-11-17 21:32:14 in Tax Articles