Member Article

SMEs set to gain from EC approved R&D Tax Relief Scheme

Small and medium-sized businesses stand to benefit to the tune of £180 million as the EC approves improvements to the UK’s Small & Medium sized Enterprise (SME) Research and Development Tax Relief scheme.

The improvements are expected to be implemented from 1 August and double the criteria for qualification as an SME from having less than 250 to having less than 500 employees and either turnover not exceeding €100 million or an annual balance sheet total not exceeding €86 million.

The rate of relief for the newly defined SME companies will also increase from an additional 50% to an additional 75% of the eligible expenditure for amounts incurred on or after 1 August.

Stuart Cottee, Partner and Head of Tax in the North East for business advisory firm Deloitte said “It has taken longer than expected to reach this point, but now that approval of the improvements to the scheme have occurred, they will enable companies to proceed with greater certainty over the benefits they can expect as a result of investing in R&D.”

Mr Cottee also noted: “It is disappointing that although the legislative changes were incorporated into the Finance Act 2007, there will be no retrospective element from the implementation.”

The price paid for EC acceptance of these changes was the introduction of two restrictions to the SME scheme. The first prevents companies whose accounts are not prepared on a going concern basis from claiming the SME relief and the second imposes a lifetime cap of €7.5 million on the additional benefit provided by the SME scheme after 1 August.

In Mr Cottee’s opinion: “The benefit of the positive changes should significantly outweigh the impact of the two restrictions imposed.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .