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

Changes to the Coronavirus Job Retention...

June 1st 2020

Friday [29 May 2020] saw the Chancellor clarify the expected changes to the Furlough scheme, introdu...

Should you consider 'pivoting your busin...

May 15th 2020

You know how terms, expressions and phrases can catch on when they are used repeatedly by those in t...

Focus
management accounts

Xero | Making Tax Digital Why Xero accounting is the digital tax platform for you ...

management accounts

Sage Business Cloud | Making Tax Digital Why Sage Business Cloud or Sage 50cloud is...

SPOTLIGHT ON R&D

Procter's Cheeses

Procter's Cheeses

Leading cheese manufacturer, Procter's Cheeses, has been developing its products for almost 30 years and produces more than 200 tonnes of cheese each year.

Our Tweets

Champion Accountants

Growth Protection Core Support Menu
Contact