Commentary

D1.404B Large company definition for R&D tax relief

Corporate tax
Corporate tax | Commentary

D1.404B Large company definition for R&D tax relief

Corporate tax | Commentary

D1.404B Large company definition for R&D tax relief

Change of status to and from SME for R&D relief

Year of grace

The R&D tax relief available to a company is dependent on whether the company is an SME or a large company. There may be instances where a company grows and becomes large or alternatively becomes an SME after being a large company. In general, where a company exceeds or falls below the employee or financial threshold at the balance sheet date, there is no change in status from an SME to a large company, or vice versa, unless the position is repeated for a second consecutive year1. So where an SME organically becomes large by growing so that it exceeds the staff or financial thresholds, there is a transition period which allows SME status to be retained until the limits have been exceeded for two consecutive accounting periods. Conversely, 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. This is known as the year of grace.

Example

The financial information for A Ltd is as follows:

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