02Apr
For years, R&D tax relief has been a vital source of funding for SMEs, helping businesses reinvest in innovation. However, recent changes in HMRC’s approach, increased scrutiny, and reduced claim values have made many businesses question whether it’s still worth the effort. As a result, SMEs are exploring alternative funding options—grants being one of the most viable solutions.
What’s Changed with R&D Tax Relief?
SMEs are facing more challenges than ever when it comes to claiming R&D tax relief. Several key factors are driving them away:
🔍 Stricter Scrutiny from HMRC – Claim reviews have become far more detailed, with increased compliance checks, additional evidence requirements, and a greater risk of enquiry, leading to substanial delays and uncertainty.
💷 Reduced Claim Values – Recent rate changes have cut the amount SMEs can receive. Combined with increased compliance costs, many businesses are seeing diminishing returns from their claims and wondering if it is worth the effort.
📑 More Administrative Burden – The reporting requirements mean SMEs must provide more detailed breakdowns, additional justification, and formal sign-offs. This has made the process more complex, time-consuming, and costly and is impacting smaller businesses with limited resources.
🌍 Removal of Overseas Subcontractor Costs – One of the biggest blows to SMEs has been the exclusion of overseas subcontractors from eligible R&D costs. Many companies, particularly in sectors like software, engineering, and biotech, rely on global expertise, and this change has significantly reduced their claimable expenditure.
Exploring the Best Options for Your Business
While R&D tax relief remains a benefical tax relief to some, grants are increasingly being used to complement or even replace lost tax relief benefits. Unlike R&D tax relief, which provides a retrospective benefit, grants offer upfront funding, giving businesses immediate support to invest in growth.
✔ Non-repayable funding – Unlike loans, grants don’t have to be paid back, making them a lower-risk option for businesses looking to innovate.
✔ Covers a wide range of industries – From agri-tech and sustainability to digital transformation and advanced manufacturing, there are numerous grants available for different sectors.
✔ Support beyond tax relief – Some grants provide access to mentorship, networking, and additional business support, offering more than just financial aid.
How We Can Help!
We specialise in helping businesses navigate the complex world of R&D and grants. If your R&D claim no longer delivers the value it once did, we can assess your eligibility for grants and other funding options to ensure you don’t miss out on financial support.
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