Large Company Scheme
The Large Company scheme applies to R&D expenditures incurred on or after 1 April 2002. A Large Company is one that does not meet the criteria of a SME.
Large Company relief is provided by allowing large companies to take a 130% deduction in respect of qualifying R&D expenditures. The expenditures must not be capital in nature, and must have been allowable as a deduction in computing the profit of the period, and must relate to the trade undertaken by the company.
Further, the types of R&D expenditures that qualify for this relief vary depending on the time period they were incurred, in that the legislation has changed a number of times since its introduction.
Pre-trading expenditure is treated as incurred on the first day that trading occurs. A deduction for the expenditure is allowed against the profit of the first accounting period in which the company trades. However, if the pre-trading expenditure occurred before 1 April 2002, it will not qualify for the Large Company relief.
For Large Companies, there is no requirement that any intellectual property rights arising from the research be vested in the claimant company.
A large company is precluded from claiming the enhanced deduction on subcontracted R&D work, except where the work is let to a qualifying body, an individual or a partnership each member of which is an individual.
If a large company claiming R&D relief has been contracted to carry out the R&D itself, it must have been contracted by either a large company, or a person otherwise than in the course of a trade, profession or vocation the profits of which are chargeable to tax of a trade. When a contractor company and a subcontractor company are members of the same group it is necessary to look at the activities of the contractor and subcontractor together in deciding whether the activities of the subcontractor company are relevant.
Contributions by large companies to independent R&D for the purpose of funding research and development carried on by the recipient qualify for R&D tax relief if they are made to a qualifying body, an individual, or a partnership each member of which is an individual. The recipient of the funding cannot, however, be connected to the funding large company.
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