Startups often assume that receiving a grant (from bodies like Innovate UK, Scottish Enterprise, Invest Northern Ireland or Enterprise Ireland) automatically disqualifies them from claiming R&D tax credits.
That’s a common misconception. While the interaction between grants and R&D incentives is complex, it’s entirely possible to access both, if you plan carefully.
Receiving a notified state aid grant, such as Innovate UK funding, does restrict your ability to claim under the SME R&D tax relief scheme for the same project. However, this doesn’t make you ineligible for R&D credits altogether.
Instead, costs relating to the grant-funded project may still qualify under the Research and Development Expenditure Credit (RDEC) scheme — a slightly less generous, but still valuable, alternative designed for larger companies or those in receipt of state aid.
Why This Matters
R&D tax credits can return up to 27% of eligible spend under the SME ERIS (Enhanced R&D Intensive Support) scheme, and around 15–16% under the new RDEC (merged) scheme. Without careful planning, you could miss out on significant cash credits or tax relief.
"By strategically planning your grant funding and R&D activities, you can ensure you don’t leave money on the table. It requires navigation, but with the right advice, both can work in your favour."
Our specialists can help you navigate grant and R&D tax credit interactions, optimise your funding strategy, and maximise the cash available to fuel your startup’s growth.
At MHA, we help innovative businesses optimise R&D claims and align funding with long-term growth.
If you’re looking to strengthen your strategy, our team is here to help.
