Do European Grants impact SME R&D tax credit claims?

The short answer is yes, SME R&D tax credit claims are impacted by grants, but the considerations are significant. 

If an SME receives state aid for an R&D project, none of the project costs can be claimed for SME R&D tax credits for every £1 of state aid received. The project may still be eligible for R&D tax credits under the RDEC scheme however, if it meets the necessary requirements. 

If an SME receives a grant that isn’t state aid, the SME may claim the grant funded portion of the project under RDEC, and the remaining amount under the SME scheme. 

Note: The award of a grant to a large company does not affect its eligibility to claim under RDEC.