Can my business make a claim under the SME scheme despite receiving grant income?

Can my business make a claim under the SME scheme despite receiving grant income?

For many UK businesses that undertake qualifying Research and Development (R&D) projects, maintaining sufficient funds to progress projects towards deployment and commercialisation is crucial – receiving income from successful grant applications is one way to do this. Companies have often assumed that they cannot receive both upfront grant income and retrospective payable R&D tax credits for the same accounting period. However, this is a common misinterpretation we have seen when helping our clients.

While businesses can receive grant income and make an R&D tax relief claim for the same accounting period, diligence is needed to ensure regulations are complied with. An R&D tax relief claim can be affected by the type of grant and the wording stated within the contract.

Many types of grants, which include the UK R&D tax relief’s Small and Medium Enterprises (SME) scheme and Innovate UK Smart Grants, are regarded as notified State Aid in accordance with European Union rules; these rules were introduced to ensure that companies’ receipt of notified State Aid does not lead to unfair commercial advantages amid the ever-competitive market.

Contrary to the SME scheme, the Research and Development Expenditure Credit (RDEC) scheme is not regarded to be notified State Aid; what this means is that notified State Aid grant income and R&D tax relief claims can coexist.

To summarise and answer the question to which this topic relates, the receipt of grant income for R&D purposes means that a claim generally cannot be made under the SME scheme; however, a claim can be made under the RDEC scheme.

Understanding how your business’s grant income impacts your R&D tax relief claim is particularly complex to navigate. As consultants who specialise in providing R&D tax relief advice and have served clients who have been awarded Innovate UK Smart Grants, Moore R&D can offer a helping hand. In addition, if you are interested in applying for grants to help fund a planned R&D project, we can introduce you to a highly experienced team with specialist skills in grant writing whom we work closely with. Contact us today through our designated Moore R&D mailbox to find out more information.

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