Claim a grant and claim R&D tax relief - surely not?

Lesley Jones, Director, Corporate Tax

It’s been a tough time for businesses over the last two years. There have rightly been more grants and other forms of support out there than ever before.

When speaking to clients about potential Research and Development (R&D) tax relief claims, it often comes as a welcome surprise that qualifying R&D activities can have funding such as a grant but still qualify for relief.

There is no doubt it complicates the issue, and it may push businesses into a different R&D category than they might otherwise use, but it does not rule out a claim entirely.

In these challenging times, it is vital that businesses access the right combination of support. So, they shouldn't rule out R&D tax relief because they have had other funding, but do take advice.

Grant funding can impact which of the two current R&D schemes businesses can claim under, or may mean your claim is partly under each scheme.

Determining which scheme applies can be difficult but our insight Choosing the right R&D scheme can guide businesses through this.  

Broadly speaking, both business size and the form of funding influence which scheme applies. If business size puts them into the more generous SME scheme the nature of the funding may mean they have to make an R&D claim fully under the Large company scheme known as RDEC (R&D expenditure credit).  

However, if the funding isn’t classed as a notified state aid, then only the element funded by a grant will be within the Large scheme and the rest can still be claimed under the SME scheme.

But either way, a claim can still be made, so don’t miss out.

As always, there are things to watch out for. Several of the COVID-19 support schemes are classed as notified state aid and so can restrict the use of the SME scheme for companies who would usually qualify to use it. 

The individual facts and how they have used any funds claimed under the support scheme will affect this.

As businesses can make an R&D tax relief claim generally up to two years after the end of the accounting period, the impacts of the different forms of COVID support will be affecting R&D claims for some time yet. We covered the different types of support in more detail here Coronavirus support schemes and R&D for SMEs.

To explore making a claim further please contact Lesley Jones, Stuart Weekes or your usual Crowe contact.


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Stuart Weekes
Stuart Weekes
Partner, Corporate Tax
Thames Valley