R&D tax relief and innovation grants: can you have both?

What changed in April 2024

Under the old regime, a grant could poison an SME R&D claim: if a project was subsidised in some other way, for example by a grant, the SME scheme was restricted and the subsidised part had to go through RDEC instead, at a lower effective value. HMRC's guidance on what costs you can claim now separates the two periods explicitly. For accounting periods beginning on or after 1 April 2024 it states: There is no restriction on claiming for subsidised costs under the merged scheme or enhanced R&D intensive support (gov.uk, checked 15 August 2026). The same page adds that for those periods, whether the project has been contracted to you or subsidised is no longer relevant to which scheme you use.

The two schemes and their rates

Merged scheme R&D expenditure credit

Claimable by companies that are trading, chargeable to Corporation Tax and have a project meeting the definition of R&D. HMRC gives the rate as 20%. It is a taxable expenditure credit and is classed as trading income.

Enhanced R&D intensive support (ERIS)

For loss-making R&D intensive SMEs: an extra 86% deduction on top of the normal 100%, so 186% in total, plus a payable tax credit which is not liable to tax and is worth up to 14.5% of the surrenderable loss.

The PAYE cap

Under either scheme the credit cannot exceed £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities for the period, unless the company is exempt. Under the merged scheme the excess carries forward.

Choosing between them

HMRC states that a company eligible for ERIS may choose to claim under the merged RDEC scheme instead, but cannot claim under both for the same expenditure.

All of the above is from HMRC's merged scheme and enhanced R&D intensive support guidance, read on 15 August 2026. Companies with a registered office in Northern Ireland should read HMRC's separate ERIS guidance for Northern Ireland.

What still stops claims

• The project does not meet the definition. It must seek an advance in the overall field of science or technology that a competent professional would recognise, not just something new to your company. Read HMRC's own test before you build a claim on it.
• Arts, humanities and social sciences do not qualify, and neither does routine improvement.
• Overseas expenditure is restricted under both schemes.
• The notification and information requirements. There are separate obligations to tell HMRC you plan to claim and to submit additional information before claiming, and missing them can invalidate an otherwise good claim.

Nothing here is tax advice, and the rules for periods beginning before 1 April 2024 are different in ways that matter. Check your accounting period start date first, then confirm the treatment with your accountant.