CIRD91900 – R&D tax relief: SME definitions: larger SMEs

The SME relief was extended to ‘larger SMEs’ in relation to expenditure incurred on or after 1 August 2008 (FA00/SCH20/PARA2). A larger SME is one which meets the normal conditions for an SME, except that it may have up to 500 staff, turnover up to €100m and balance sheet total up to €86m. A larger SME is entitled to R&D relief under the SME, rather than the large company, rules.

It is possible that a company which would otherwise have been large for an AP ending in 2008/09 may therefore now be a larger SME for part of that AP, based on its expenditure incurred on or after that date.

In order to determine whether a company qualifies as a larger SME for part of the AP, it is necessary to apply the limits and thresholds set out above to the expenditure incurred on or after 1 August, taking account of the fact that the period in question is less than a full AP i.e. if the company's year end were 31 December then the period from 1 August to 31 December is 5/12 of a full year so the relevant thresholds to apply to the expenditure would be 5/12 of the full amount;

Where a company qualifies as a ‘larger SME’ for part of the AP, but remains a large company for the period before 1 August, its R&D claim will consist of two elements. The first, calculated as a large company, will be based on expenditure incurred on or before 31 July 2008, and the second, calculated as a larger SME, will be based on expenditure incurred on or after 1 August 2008.

It is possible that a company which was large and becomes a larger SME may have been entitled to relief under FA02/SCH12 but not be entitled under FA00/SCH20 if it is not entitled to any intellectual property arising from the R&D (FA00/SCH20/PARA3). In such a case the company would not be entitled, as an SME, to additional relief for large companies (FA02/SCH12/PARA10B) because that relief is only available where the SME fails to qualify because its expenditure is subsidised.