Claiming a grant and making an R&D tax relief claim – too good to be true?

Lesley Jones, Director, Corporate Tax

After an extended period of unprecedented financial support being made available to businesses it’s vital to make sure that you don’t rule out additional tax relief as a result.

When we speak to clients about potential R&D tax relief claims it sometimes comes as a welcome surprise that your qualifying research and development activities can receive a form of funding such as a grant, and yet you can still claim 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 don’t rule out R&D tax relief on the basis of claiming other support.

Grant funding can impact which of the two R&D schemes you can claim under, or may mean your claim is partly under both schemes.

It can be difficult to determine what scheme you fall under, our insight 'Choosing the right R&D scheme' can help you navigate these tests.

Broadly if your business size puts you into the more generous SME scheme then the nature of your funding will either mean your claim must be made in full under the Large company scheme, or provided the funding isn’t classed as notified state aid the amount funded by a grant will be under the Large scheme and any excess under the SME scheme. If the funding is notified state aid the entire claim must be made under the Large scheme.

But either way the good news is still that a claim is possible.

Several of the current 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.

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