R&D tax Credits – IP ownership no longer required

John Moore, January 5th, 2011

The rules for small or medium sized companies (SMEs) in this area have now changed allowing more companies to claim R&D tax relief and receive R&D tax credit repayments.

Until recently SMEs have been prevented from claiming R&D tax relief unless they have owned any intellectual property (IP) derived from the R&D activities carried out. This restriction applied whether the company was otherwise eligible to claim under the more generous SME regime or under the large company regime where the expenditure was subsidised in some way. This meant in practice that unless the R&D activity was subcontracted to the SME, in which case a claim under the less generous large company scheme may have been available, SME companies not owning the IP could not make a claim to R&D relief at all.

On 16 December 2010 the legislation was finally changed to remove this requirement. This was first proposed in the pre budget report of 9 December 2009 and was subsequently left out of the two earlier Finance Acts of 2010. The lifting of the IP ownership condition is effective for claims made for accounting periods ending on or after 9 December 2009. Companies that were previously affected should ensure that claims for periods ending after this date correctly reflect all expenditure claimable.

This is another example of the complexity of the R&D tax relief rules for SMEs and how the frequent changes in the legislation and practice since its introduction in 2000 can lead to under or over claims if the claim methodology is not regularly reviewed.


Please do not hesitate to contact John Moore on 0207 292 8850 or 07584 907 760 if you would like to discuss the potential effect of this change, or any other aspect of the R&D tax relief regime.