Contact: James Igoe
Deloitte
Public Relations
+44 (0)20 7303 8247

As mentioned in today's Pre-Budget Report, the Government is currently in dialogue with the European Commission regarding the extension of the SME regime to companies with between 250 and 500 employees, a move that was announced originally in the 2005 Pre-Budget Report.

Speaking in response to the PBR, David Cobb, head of R&D tax at Deloitte, said:

"Subject to approval by the European Commission, we expect to see the introduction of a new definition of a 'mid-sized' company.  This should have higher thresholds for employees and possibly higher turnover and balance sheet limits than the current SME definition.  We anticipate that the current R&D tax regime for SMEs will then apply to claims made by these 'mid-sized' companies."

"It is disappointing that there was no announcement of any extension of the R&D relief to include capital expenditure, as this was also being considered by the Government following the Pre-Budget Report 2005. In the meantime, it would be useful to see further clarification of when HMRC will seek to argue that costs incurred on R&D should be treated as capital in nature regardless of their accounting treatment."

For further comment from David Cobb please call our Pre-Budget Report press hotline: 020 7007 3333.

- Ends -

Note to editors:

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.