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HMRC internal manual

Corporate Intangibles Research and Development Manual

R&D tax relief: conditions to be satisfied: subsidies (SME scheme only)

CTA09/Ss1052(6), 1053(5) and 1138 - SME scheme only

R&D tax reliefs under the SME scheme are not available for expenditure that is subsidised. If the only reason that the expenditure does not qualify for SME scheme R&D tax relief is that the expenditure is subsidised, then, for accounting periods beginning on or after 9 April 2003, an SME can make a claim for relief under the large company scheme (CIRD89000).

Subsidised expenditure

Where a project has received any funding which is a notified State Aid (CIRD81670) then no expenditure on that project can qualify for the R&D tax relief under the SME scheme.

If a grant or subsidy is received other than by way of notified State Aid, the expenditure is subsidised to the extent that it does not exceed the subsidy. This may result in the expenditure qualifying for R&D tax relief partly under the SME scheme and partly under the large company scheme.

A notified State Aid, grant, subsidy or payment that is not allocated to particular expenditure should be allocated according to the underlying facts.