Revenue & Customs Brief 55/08 outlines the change of Small and Medium Enterprise status for companies making claims under the Research & Development and Vaccine Research Relief schemes.

This Brief announces a change to HMRC's interpretation to a company's SME status when it is taken over or merged or 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 and Vaccine Research Relief schemes.

Previously it had been the practice to accept that if a company was an SME at any time in an accounting period then, for the purposes of the R&D and VRR schemes, it was treated as an SME for the whole of that 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 it will be regarded 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.

Full details of the change in practice are available at
http://www.hmrc.gov.uk/briefs/company-tax/brief 5508.htm