Is R&D tax relief considered state aid?

What is R&D tax relief?

R&D tax relief provides a way for the UK government to reward innovative companies that are investing in development. It’s a great option for enterprises, large and small, looking to fund ongoing R&D. In terms of whether R&D tax relief is state aid, this matters because there are limits on how much state aid can be claimed by UK companies so it’s important to work out what is likely to be the best option for you.

Also known as R&D tax credits, this is a form of relief that is available when companies are investing in projects that are designed to be innovative. This often means those that are focused on making an advance in science, technology, maths or social sciences. There are a number of key requirements for a business to be eligible for R&D tax relief, including that the project is designed to try and overcome an area of uncertainty and that the challenge is not one that could easily be worked out by a professional in the field. The project must also be focused on creating an advance in the field as a whole – and not just for the individual business. There are a number of criteria that relate to the types of expenses that can be included in a claim for R&D tax relief too.

What types of R&D tax relief are available?

• SME relief – This is available to companies with 500, or fewer, employees and a turnover of less than €100 million (or a balance sheet total that is under €86 million). Qualifying companies can deduct an extra 130% of costs from annual profit before tax (this is on top of the standard 100% deduction, which means a total of 230%).
• Larger company relief – This is called Research and Development Expenditure Credit (RDEC) and is estimated at around 13% of the qualifying expenditure.

Is R&D tax relief state aid?

The reason this matters is that it’s only possible to access one type of state aid in the UK. So, ensuring that you’re getting the best support from the most sensible option for you is vital. State aid is defined as any advantage that is given by public authorities to organisations on a selective basis. Because this will effectively create a competitive advantage for a company it needs to be justifiable. R&D tax relief is generally considered to be state aid, which is why your business will not be eligible for it if you have already claimed for another type of state aid. For example, if you have already benefited from grant funding or some kind of COVID support package from the government, then it’s unlikely that you’ll be able to claim R&D tax relief.

R&D tax relief offers a way to help support ongoing investment in innovation for any business. However, it does come under the category of state aid, which is why it’s so important to carefully manage this and any other financial support your business receives.

An R&D tax credit loan is an alternative, non-dilutive source of capital for those businesses. SPRK delivers this by positioning itself as the hub between R&D companies seeking capital, third-party data providers and expert R&D advisers.

We’re passionate about supporting businesses that are brave and bold in staying ahead of the curve and are creating economic growth and opportunities for our country. With SPRK Capital’s R&D tax credit loans, you can get advance funding on your R&D tax claim.

Apply here.