What you need to know about Grants and R&D tax credits
Financial aid is crucial to many businesses carrying out innovative research and development projects, but ascertaining whether your activities are eligible for R&D tax credits can be difficult. Many businesses that receive grant funding assume that they are eliminated from being able to apply for R&D tax credits, but, this is not strictly true. Here, we explore what you need to know about grants and whether they impact your ability to apply for R&D tax credits.
Grants and R&D tax credits
The first thing to clarify is that there are two separate schemes under which R&D tax relief can be claimed. The SME scheme applies to companies with fewer than 500 employees and an annual turnover of under €100 million. The RDEC scheme is for businesses that exceed either (or both) of these limits. Under the SME scheme, R&D tax credits cannot be claimed if a State Aid grant has been received – if your business wishes to make a claim, it must be handled under the RDEC scheme which is less generous.
It’s worth noting that a particular project can be ineligible for research and development tax credits under the SME scheme, but that doesn’t mean the business is. If you have received a notified State Aid grant for a project, any claim for R&D tax credits relating to that project must go through the RDEC scheme, but other R&D activities being carried out are still be eligible under the SME scheme.
There are, however, grants that are non-notified State Aid, and therefore have less impact on an R&D tax credit claim. Provisions such as Horizon 2020 and the Seventh Framework Programme (FP7) can be used alongside an application for R&D tax credits. If your business chooses this route, you can make a claim under the SME scheme for any costs that aren’t covered by the grant. The grant subsidised element can then be claimed under the RDEC scheme.
The best option for your business
Choosing the option that offers the most value to your business is not necessarily straightforward, so it’s a good idea to seek advice from an R&D tax specialist. Considerations include how soon you need the financial support – a grant provides funding upfront, whereas R&D tax credits are claimed in retrospect.
An advisor can assist with identifying whether a grant, R&D tax relief claim or a combination of both is best for your needs. They will also be able to identify qualifying R&D activities and costs within your records and help you with the claims process.
Apply for R&D tax credits
With specialist knowledge and experience in the tax and accounting sectors, R&D Tax Solutions can offer consultancy on R&D tax claims and assist with the completion of your claim. By reducing the burden of the claims process, which is often perceived as complicated and inconvenient, our service enables you to focus on managing your business. Contact us today on 0161 298 1010 to find out more.