Short answer
You can often claim R&D tax relief on a project that also has a grant, such as an Innovate UK award, but how the grant-funded costs are treated depends on which scheme applies. For accounting periods starting on or after 1 April 2024, the rules on subsidised expenditure changed under the merged scheme and ERIS. For earlier periods under the old SME scheme, grant-funded costs often had to be claimed under the less generous RDEC instead. Check the treatment with your adviser before you claim.
Key facts
- Grants and R&D tax relief can apply to the same project
- Treatment depends on the scheme and the accounting period
- Old SME scheme: subsidised costs often moved to RDEC
- Merged scheme and ERIS: rules changed from April 2024
- Both can be borrowed against, separately
What is subsidised expenditure?
Costs funded by a grant or other public subsidy. Under the old SME scheme, costs funded by a grant (especially notified state aid) could not get the full SME relief and were usually claimed under RDEC. The merged scheme and ERIS changed this for accounting periods starting on or after 1 April 2024.
How to handle both
- Tell your R&D adviser about every grant, including the offer letter and which costs it covers.
- Agree how grant-funded costs will be treated before preparing the claim.
- Keep grant claims and R&D claims consistent: the same costs, the same time records.
Two cash gaps, two sources of finance
A company with a grant and an R&D claim waits for two lots of money: grant payments, usually quarterly in arrears, and the R&D tax credit after the tax return. Both can be borrowed against separately. See Innovate UK grants paid in arrears and how much you can borrow against an R&D claim.
Related: R&D Advance →
Related questions
Does an Innovate UK grant stop me claiming R&D tax relief?
No, but it can affect how the grant-funded costs are treated. Ask your adviser.
Can I use match funding costs in my R&D claim?
Costs you fund yourself on a grant project can usually qualify if they meet the normal rules.