Funding and making an R&D tax relief claim

Lesley Jones, Director, Corporate Tax

The government support for business and the response to COVID-19 continues to generate headlines but it is also worth considering long-standing incentives to help businesses such as R&D tax relief.

We find from discussions with clients that there can be an incorrect assumption made that if your qualifying Research and Development activities receive another form of funding such as a grant, there is no possibility of claiming R&D tax relief.

Whilst it does complicate the position, and care needs to be taken to ensure a claim is made under the right R&D scheme, it does not mean that no claim is possible.

In these challenging times it is so important for businesses to access the right combination of support so you shouldn’t rule out R&D tax relief on the basis of claiming other support.

HMRC has recently confirmed that several of the recent COVID-19 support schemes are classed as notified State Aid, which potentially means that companies who may have been able to claim under the SME scheme for R&D cannot use that scheme. However this will depend on the facts and how any funds claimed under these support schemes have been applied.

Where the SME scheme is not available, a claim may still generally be possible under the Research and Development Expenditure Credit (RDEC). This is less generous with a cashflow benefit of £10,530 per £100,000 of expenditure compared to a £43,700 reduction in Corporation Tax for profitable SMEs and a potential £33,350 cash repayment for loss making SMEs. However, it is still a valuable form of funding for qualifying companies

To explore whether your company’s activities qualify please contact us or visit our dedicated R&D page.

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Stuart Weekes
Stuart Weekes
Partner, Corporate Tax
Thames Valley