Can You Claim R&D Tax Credits If You’ve Received A Grant?

Businesses looking to claim R and D tax credits will inevitably have a number of questions about what impacts their eligibility to claim. The relief can bring much needed funding back into acompany, but determining if you qualify can be challenging. In fact, so many organisations are either unaware of their eligibility to claim, or unsure of how to do so, that an estimated 90% don’t receive R&D tax relief at all.

Grants are another source of financial aid for companies conducting research and development, so it’s necessary to evaluate all the options before deciding whether a grant or tax credits is more valuable to your business. So, can you claim R&D tax credits if you’ve received a grant?And which is more valuable?

Grants and R&D tax credits

Of the two tax schemes available, it’s the SME scheme that is impacted most by the receipt of a grant. For the purposes of R&D tax, SMEs are businesses of under 500 employees that turn over no more than €100 million per annum. The scheme is classified as a ‘notifiable State Aid’, which means that if your business has already received a State Aid grant for a qualifying project, it won’t be eligible for R and D tax credits under the scheme.

That isn’t to say that the business as a whole is ineligible, just the particular project that has received a grant. Other research and development projectsthat aren’t grant-funded, or future activities that don’t receive a State Aid grant, can still be claimed for under the SME scheme.

Non-notified State Aid grants, such as Horizon 2020 and the Seventh Framework Programme (FP7), can be used alongside R&D tax credit claims sincethey are not considered to distort competition. The value of the subsidy that is used against research projects is handled under the less generous RDEC scheme.

Which should I use?

Every business has individual needs when it comes to funding, so there is no single answer to this question. The grant options each need to be investigated, as does an R&D tax claim, to determine which is best for you. It may even be the case that each project undertaken requires slightly different methods of funding. It’s advisable, therefore, to consult an R&D tax specialist who can provide guidance on which schemes will prove most valuable.

One consideration is the size of your business. If your organisation falls under the RDEC scheme (i.e. has over 500 employees or an annual turnover of €100m or more), a grant won’t affect your ability to claim. If it is classified as an SME, however, the claim will be impacted as outlined above.

Another consideration is when you will need financial support.With a grant, you’ll receive the money upfront, whereas R&D tax credits need to be claimed in retrospect.

It may be that you can benefit from a combination of grant funding and tax relief. As mentioned above, a non-notified State Aid grant has minimal effect on your claim for tax credits, so can be a good option.