| EC approval of SME definition expected |
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| Friday, 13 June 2008 | |
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The UK is close to receiving EC approval to the extension of the SME definition for R&D relief.
Business advisory firm Deloitte said that EC approval would see a doubling of the criteria for qualification as a Small and Medium Enterprise (SME) to 500 employees and a turnover not exceeding €100m or an annual balance sheet total not exceeding €86m. Valid claim To make a valid claim under the SME regime, companies must be able to demonstrate that any intellectual property (IP) resulting from the R&D vests with them and they must exclude any expenditure covered by grants or subsidies. These conditions do not apply to the equivalent relief for larger companies. Also, claims cannot be made under the SME regime in relation to work that was contracted to them by a third party or for a project in respect of which another form of notified state aid has been received. Companies that are SMEs can however still make claims under the less generous large company regime in respect of contracted work and expenditure covered by grants, subsidies or notified state aid so, whilst the changes should always be positive, there may well be companies for whom the apparently generous extension may not bring such large additional benefits. On the positive side, companies can include 65% of payments made to subcontractors in an SME claim, a cost category not available to large companies. Loss making firms David Cobb, global head of R&D tax at Deloitte, said that the extension would be good news for those companies that did not previously fall within the definition of an SME, and especially good news for those that were loss making. The large company R&D regime does not provide any cash payment option for loss makers. “It is important however that companies that were previously claiming under the large company scheme take account of the numerous and fundamental differences between the SME and large company regimes when making their claims if this change affects them,” Cobb concluded. Related articles
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