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Once a deathblow to R&D tax relief claims, grant-funded research is now permitted following the introduction of the Merged Scheme.
This has opened the door to new possibilities where innovative companies no longer need to decide how best to get their funding.
The Innovate UK and UKRI Grants are popular choices for innovative companies, given that they are specifically designed to uplift those who wish to forge a path to new discoveries in their field.
What are the important considerations for combining grant funding and R&D tax relief?
Grant-funded R&D is classified as subsidised expenditure and thus treated differently from standard expenditure.
This is because there is notably less financial risk associated with grant funding when compared to R&D projects funded by the business itself.
As such, subsidised expenditure is typically ineligible for the increased rate of recovery afforded by the ERIS scheme.
It is with clients who are hoping to leverage the ERIS Scheme that the biggest considerations must be made.
The most important consideration is whether the Innovate UK or UKRI Grants push a client past the de minimis limit.
If the de minimis limit of £300,000 (£252,565.50) over 3 years is breached, then the R&D is considered subsidised expenditure and cannot be treated as part of an ERIS Scheme boosted R&D tax relief claim.
However, if the grant stays within the de minimis limit, then a loss-making SME can use the ERIS Scheme to cover all of its qualifying expenditure.
It is worth noting that considerations of the de minimis limit are not solely restricted to Innovate UK or UKRI Grants, but to any other applicable grant within the previous two fiscal years.
If all de minimis awards combined push a company past the threshold, the excess costs become ineligible for the ERIS Scheme.
How can innovative companies maximise their funding?
Companies that are not using the ERIS Scheme are at liberty to secure whatever funding will help them to innovate.
Combining grants with R&D tax relief is now a viable way of ensuring that a business does not struggle financially as a result of groundbreaking work.
For companies that seek to utilise the ERIS Scheme, being selective about the types of grants applied for could be the key to maximising funding.
Research-intensive, loss-making SMEs need to consider whether they stand to have greater funding potential by gathering a network of grants or by leveraging the ERIS Scheme.
As an accountant, you can guide your client in this decision-making process by examining how much money they stand to receive through both avenues.
As R&D tax consultants, we can help determine an accurate picture of the kind of benefit your client stands to receive from a maximised, fully compliant R&D tax relief claim.
Help your client make the most of new funding opportunities. Speak to our team today!
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