It’s important to know that as R&D Tax Credits at the SME level are seen as notifiable State Aid, they can only be offered to companies not already receiving other notifiable State Aid for the R&D project in question. The reasoning behind this restriction is due to European rules on State Aid to prevent anti-competitive behaviour from member states. Sensibly, the EC is trying to avoid the farce of the farming subsidies in the 80’s that left “butter mountains” and “wine lakes”, with farmers being paid to produce goods for which there was no market (they only exist to a lesser extent today!).
So, for the costs of a project receiving aid it is only possible apply for tax credits under the large company scheme. The rule is very sensible and pragmatic here, because it doesn’t go and disqualify your company from claiming R&D Tax credits under the SME scheme altogether, but only for the particular projects that received aid. This is likely to “result in the expenditure qualifying for R&D tax relief partly under the SME scheme and partly under the large company scheme.” In short, this means that you shouldn’t give up on the thought of claiming R&D Tax Credits even if you are receiving some State Aid!
It’s also necessary to understand that not all grants or funding received necessarily count as notifiable State Aid. If you are a recipient of some state funding, it’s good to check with your provider whether the funding you are getting is defined as “notifiable State Aid”. Notified State Aids are usually government funded grants such as the Grant for Research and Development, or TSB Smart Grants. These have by definition been “notified to, and approved by, the EC.”
Either way, if you have received some funding via the government be it notified State aid or not, it still could be possible to benefit from the R&D tax credit scheme.
Assuming you understand how enhancement and surrender rates work (if not, check this article), there’s still the tricky question of figuring out which rate to use. Recently, HMRC have changed…
Most startups, in particular tech/web startups, are well advised to steer clear, and not waste their money on patenting things. At that stage, it’s fair to say that patents are…