Differences between the SME and large company schemes
Depending on the size of your company, you can claim for R&D tax credits under the SME or large company schemes. This page tells you about the differences between the two schemes
To claim under the SME scheme for work undertaken before 1 August 2008 you must have fewer than 250 employees with either an annual turnover not exceeding €50m or a balance sheet totalling €43m, and not be part of a larger Enterprise that would fail these tests.
For work undertaken on/after 1 August 2008 the SME scheme is being extended to companies with fewer than 500 employees which have an annual turnover not exceeding €100m and/or with an annual balance sheet total not exceeding €86m.
Other companies should apply for the large company scheme.
SMEs not in profit can get a cash payment equivalent to about 24p per £1 of qualifying expenditure instead of tax relief - thus getting money to support R&D while the company is loss-making.
Special rules
Unlike the large company scheme the SME R&D tax credits scheme is a 'notified State Aid' and there are limits on the total amount of aid that can be given for projects. A company cannot therefore receive the SME R&D tax credit if it gets another notified state aids for the same project. Examples of notified State Aid include collaborative grant funding under the Technology Programme and Grant for R&D.
Where the rules prevent tax credits being claimed under the SME scheme, in certain limited circumstances a claim may be made under the large company scheme instead. For a detailed explanation see HMRC CIRD manual - 81670. Each notified state aid has a specific number which can be traced via the attached link using the 'Edit', 'Find on this Page' facility http://ec.europa.eu/comm/competition/state_aid/register/ii/by_ms_gbr.html.
SME scheme – key points
- 150 per cent rate of enhanced deduction, increasing to 175 per cent for expenditure incurred on or after 1 August 2008
- Payable credit equivalent to about £24 for every £100 of qualifying expenditure on R&D
- Company can claim for expenditure on R&D it sub-contracts to others
- Company cannot claim for contributions to independent research
- Claim can be reduced if the R&D project is subsidised or a grant is received in respect of it
- Company must own the intellectual property arising out of the R&D
- A cap of €7.5 million on the amount of relief per R&D project was introduced from 1 August 2008
- From 1 August 2008 companies whose most recent accounts are not produced on a going concern basis are unable to claim relief
Large company scheme – key points
- 125 per cent rate of enhanced deduction, increasing to 130 per cent for expenditure incurred on or after 1 April 2008
- No payable credit
- Company can claim for contributions to independent research carried out by charities, universities and scientific research organisations
- Company can only claim for expenditure on R&D it carries out itself, unless it sub-contracts R&D to universities, charities or public sector research establishments
- No reduction for grant or subsidy
- Company need not own the intellectual property arising out of the R&D
- There is no upper limit on the amount of a claim
More information for SMEs
See the R&D relief calculator.
