Recent legislative change has seen an increase in the number of companies that can claim a cash rebate in the form of research and development tax credit, but under a legal 'catch 22', the companies who need it the most are the ones struggling to obtain it. In order to claim a cash rebate, those businesses applying must be unprofitable and qualify as small or medium sized enterprises. In August the size limits for what constitutes a business as an SME were doubled. The new rules state that to qualify as an SME, a company should have fewer than 500 employees and either turnover of no more than €100m (£77.6m) or gross assets on the balance sheet of less than €86m. David O'Keeffe, head of the R&D tax credits team at KPMG UK, said: 'When hunting for cash down the back of the corporate sofa, businesses really would do well to remember R&D tax credits. Many are not aware of the changes to the SME definition so don't realise that they qualify.' Those SMEs with taxable profits can still claim R & D tax relief but it comes in the form of reduced tax payments as opposed to a cash rebate. Earlier this week business recovery specialist Begbies Traynor announced that the number of distressed businesses has doubled in the past year. However, there is a 'catch 22' situation for those businesses that need a cash boost the most. Current legislation states that if a business is reliant on R&D tax relief in order to remain a going concern, it is excluded from claiming the benefit. O'Keeffe added: "There is a cruel irony in denying a business a lifeline that could save it precisely because without such support, it will go bust. The reasoning behind these rules is that Europe does not want tax rebates propping up struggling enterprises. 'Companies should most definitely make sure that they claim these valuable tax benefits but if they're really in the last chance saloon, they may be out of luck."