Commentary

D1.404 SME definition for R&D tax relief

Corporate tax
Corporate tax | Commentary

D1.404 SME definition for R&D tax relief

Corporate tax | Commentary

Meaning of SME and large company for R&D tax relief

D1.404 SME definition for R&D tax relief

The R&D tax relief available to a company is dependent on whether the company is an SME or a large company.

The definition of an SME1 is taken from the Commission Recommendation 2003/361/EC, which is reproduced at CIRD92800, however the headcount and financial limits were extended in 2008 to include larger SMEs but only for the purposes of R&D tax relief2. Therefore, in order to qualify as an SME for R&D purposes, an enterprise must have3:

  1.  

    •     less than 500 staff (see 'Staff headcount for R&D' below), and

  2.  

    •     either:

    1.  

      –     turnover not exceeding €100m, or

    2.  

      –     a balance sheet total not exceeding €86m

  3.  

    (see 'Turnover and balance sheet totals for R&D' below)

The EC definition uses the term enterprise. The Recommendation states that an enterprise is considered to be any entity engaged in an economic activity, irrespective of its legal form. Enterprises can include companies, charities, universities, statutory bodies, partnerships and trusts and government4.

The above ceilings are not necessarily calculated solely by reference to the accounts of the enterprise itself. Where an enterprise is not autonomous it may be necessary to take account of the headcount, turnover and balance sheet totals of other enterprises to which it has connections (see 'Aggregation of data and linked/partner enterprises' below).

The European Commission publication What is an SME? has detailed guidance on the definition of an SME although it should be remembered that the

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