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HMRC have announced a change of interpretation of a company's small and medium-sized enterprise (SME) status when it is taken over by — or its merging or becoming associated or linked with — another enterprise.
The revamp will take effect from the begiining of next month, and will affect companies making claims under the research and development (R&D) and vaccine research relief schemes.
It has been the practice to accept that if a company is an SME at any time in an accounting period then, for the purposes of the R&D and VRR schemes, it will be treated as an SME for the whole of that accounting period.
This will change so that where a company loses its SME status on or after 1 December 2008 as a result of being taken over by a large enterprise — either a single large company, or a collection of smaller entities that when taken together are regarded as large — it will be regarded as a large company for R&D and vaccine research purposes for the whole accounting period in which the change occurred.
Where an SME becomes large by growing so that it exceeds the staff or financial thresholds, however, a transition period 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.
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.
