The announcement was made in Budget 2007 that the enhanced reliefs for research and development available to companies would be extended. The Small and Medium Company (SME) scheme is proposed to give 175% rather than 150% tax relief, and the large company scheme gives 130% rather than 125% relief.
At the same time the enhanced rate at which tax relief on vaccine research relief is given will be reduced from 50% to 40%.
These measures have been confirmed, subject to obtaining EU State Aid agreement. Obtaining the EU State Aid approval requires the UK to meet certain European Commission Guidelines. In order to comply, the following measures have been announced:
• There will be a cap of €7.5m per project on the amount of expenditure eligible for SME research and development tax relief and vaccine research relief. Larger companies will need to make an incentive declaration when claiming the vaccine research relief;
• Companies whose most recent accounts have not been prepared on a going concern basis will not be eligible for the SME or vaccine research reliefs. This measure is intended to stop credits going to companies ‘in financial difficulties’. The Regulatory Impact Assessment on this point says ‘Companies will already hold information on whether they are going concern and there should be no uncertainty surrounding this fact.’ This appears to be an unworkable condition in that the restriction does not, on the face of it, apply to companies where the auditors have qualified the audit report on a going concern basis, only to those where the accounts are drawn up on a non-going concern basis.
To qualify as a SME, a company must have up to 250 employees and either turnover up to €50m or a balance sheet total of less than €43m. These thresholds are unchanged.
