CIRD91500 - R&D tax relief: SME definition: aggregation for 2003 EC SME Recommendation test
To determine whether or not a particular enterprise falls within
the Recommendation’s definition of an SME it necessary to
test the enterprise against certain ceilings relating to staff
headcount, turnover and balance sheet totals. To fall within the
definition the enterprise must stay below the staff headcount
ceiling and fall below at least one of the turnover and balance
sheet total ceilings (
CIRD91400).
But in order to apply these ceiling tests to an enterprise
it is first necessary to identify into which of three types of
enterprise it falls - autonomous, partner or linked.
Autonomous enterprises
An autonomous enterprise is defined by exclusion - an autonomous
enterprise is any enterprise that is not a partner enterprise or a
linked enterprise.
An enterprise is autonomous if it has a holding of less than
25% of the capital or voting rights in one or more enterprises
and/or other enterprises do not have a stake of 25% or more of the
capital or voting rights in the enterprise.
It is possible for an enterprise to have several investors
each with a stake of under 25% and still remain autonomous,
provided the investors are not linked. If the investors are linked
then the enterprise may be considered to be linked or partnered
depending upon its particular circumstances.
It is possible for an enterprise to be considered autonomous
even if the 25% threshold is reached or exceeded by any of the
following investors:
- public investment corporations, and venture capital companies
(CIRD92100),
- individuals or groups of individuals with a regular venture
capital investment activity who invest equity capital in unquoted
businesses (‘business angels’), provided the total
investment of those business angels in the same enterprise is less
than €1.25 million,
- universities or non-profit research centres,
- institutional investors (CIRD92200), including regional
development funds,
- autonomous local authorities with an annual budget of less than
€10 million and fewer than 5,000 inhabitants.
It is possible for the enterprise to retain its autonomous
status whilst having one or more of the investors listed above.
Each investor may have a stake of no more than 50% and they must
not be linked to one another.
In the case of an autonomous enterprise the ceiling tests
are applied solely by reference to the accounts of the enterprise
itself.
Linked enterprises
Broadly, linked enterprises are those in which one enterprise is
able to exercise control, either directly or indirectly, over the
affairs of the other.
Where an enterprise is a linked enterprise the ceiling tests
are applied to the aggregates of the figures in its own accounts
and those from the accounts of all other enterprises to which it is
linked. Further information on linked enterprises is at
CIRD91600.
Partner enterprises
Partner enterprises are enterprises that are not linked, but
where one of them holds (either on its own or in combination with
other enterprises with which it is linked) 25% or more of the
capital or voting rights in the other.
Where an enterprise is a partner enterprise the ceiling
tests are applied to figures based on the accounts of the
enterprise after inclusion of a proportion of the figures from the
accounts of any partner enterprise.
There is a relaxation of the 25% limit in the case of
specified investment enterprises that play a positive role in
business start-up and financing. Further information about this and
partner enterprises generally is at
CIRD91700.
