Government Grants and R&D Tax Relief

February 28th, 2019

As companies continue to identify new funding streams, they rarely stop to think about how it might affect their existing funding streams, i.e. their annual Research & Development (R&D) tax credit claim. Grant funding can be used alongside R&D relief, but the rules are complex, and it can be tricky to navigate for business owners.

There are two separate R&D schemes through which you can claim Corporation Tax relief: SME R&D Relief for small and medium sized companies and Research and Development Expenditure Credit (RDEC) for larger companies. The majority of businesses apply under the former scheme, given that businesses are eligible up to a turnover of €100m.

Complexities surround whether funding acts as a type of state aid, as there are limits on the amount of state aid a business can receive. An SME R&D tax credit is a form of EU state aid, whereas an RDEC tax credit is not. Grants can also constitute EU state aid, for example, grants from Innovate UK or The Regional Growth Fund (RGF). Where a company receives a notifiable EU grant to directly assist with an R&D project it immediately disqualifies the project from falling under the SME scheme. This is a problem, as the SME scheme provides far greater tax relief than the RDEC.

Businesses should consider carefully the interaction between government grants and R&D tax relief and weigh up the benefits of each before committing to funding.

To discuss your funding planning, contact our lead R&D tax advisor, David Herd, on david.herd@championgroup.co.uk or 0161 703 2500.


BACK TO NEWS PAGE »
Latest News

It’s the big 5-0 for the Champion of a...

July 3rd 2019

Here at Champion, we’ve shown our commitment to development, career progression and upskilling ...

Tax spotlight: Transferring property to ...

July 2nd 2019

Transferring property between spouses is a popular way of maximising rental income. Often, the owne...

Focus
management accounts

HOW WE HELP YOU Our Management Accounts service can be fully tailored to your nee...

corporate finance

Growing through acquisition is an exciting opportunity for your business, but fear o...

SPOTLIGHT ON R&D

Sevron Ltd

MQI Logo marketing1

Innovative software developers, Sevron Ltd, help businesses reduce risk in the workplace by creating specialist Health & Safety software systems.

Our Tweets

Champion Accountants

Growth Protection Core Support Menu
Contact