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HMRC revise SME status for R&D/VRR schemes |
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HMRC have published Brief 55/08, which covers a change of interpretation where an SME's status changes for R&D or VRR purposes. HMRC have announced a change of their interpretation, which will apply where a company's SME (Small and Medium Enterprises) 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 (R&D) and Vaccine Research Relief (VRR) schemes. It has been HMRC 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, HMRC have agreed that it retains its SME status until the end of the relevant accounting period. 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) HMRC will regard it 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. The change of HMRC interpretation will be reflected in the Corporate Intangibles and Research and Development manual at paragraph CIRD 92000.
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About The Author  Sarah Laing Sarah is a Chartered Tax Adviser. She has been writing professionally since joining CCH Editions in 1998 as a Senior Technical Editor, contributing to a range of highly regarded publications including the British Tax Reporter, Taxes - The Weekly Tax News, the Red & Green legislation volumes, Hardman's, International Tax Agreements and many others. She became Publishing Manager for the tax and accounting portfolio in 2001 and later went on to help run CCH Seminars (including ABG Courses and Conferences). Sarah originally worked for the Inland Revenue in Newbury and Swindon Tax Offices, before moving out into practice in 1991. She has worked for both small and Big 5 firms. She now works as a freelance author providing technical writing services for the tax and accountancy profession. |
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Article Added Monday, 17 November 2008 |
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