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HMRC internal manual

Corporate Intangibles Research and Development Manual

R&D Tax reliefs: R&D expenditure credit (RDEC) scheme: subsidised qualifying expenditure

Chapter 6A CTA 2009 S104F, G and H

Under GAAP the correct accounting treatment when a subsidy is received is that the subsidy is brought in as a receipt and the subsidised expenditure is recognised in full. Expenditure that is subsidised is therefore deductible in computing the profits of the trade and can attract R&D expenditure credit

There is no provision preventing subsidised expenditure from qualifying for R&D Expenditure Credit.

SMEs are able to claim R&D Expenditure Credit in respect of expenditure that is not allowed under the SME scheme if:

  • the expenditure would have been allowable had the SME been a large company, and
  • the expenditure does not qualify under the SME scheme only because it was subsidised (CIRD81650) (including a notified state aid CIRD81670).

Such claims will unlike the large company scheme be available for a payable credit providing all other conditions are met.

Example -

A Ltd (an SME company) incurs staffing costs of £500,000 in carrying out relevant R&D in an accounting period beginning 1 July 2013.

A charity provides a £100,000 grant toward the staffing costs for the year.

  • £400,000 of the staffing costs are qualifying expenditure under the SME scheme; the 125% enhancement is £500,000, and
  • £100,000 of the staffing costs are qualifying expenditure under R&D expenditure credit company scheme i.e. at 10% £10,000 and be paid to the company providing all of the other conditions are met.