The old trap, briefly
Under the old SME scheme, expenditure that was subsidised, grant-funded costs the obvious case, was restricted, typically diverting the affected spend into RDEC at lower value. The interaction was widely misunderstood, punished exactly the companies public funding was backing, and generated a small industry of grant-structuring advice. It is worth one paragraph of history because pre-2024 periods still live under it; the fuller old-world context is on the old schemes page.
The new position, on the record
For the merged scheme, HMRC’s guidance states the change in a sentence built to be quoted: the rules relating to subsidised expenditure in the SME scheme were not carried forward into the new merged scheme. The consequence, in the guidance’s own terms: where a company receives a grant covering part of the costs of its R&D, the amount of relief available will not be reduced. And for ERIS, the manual is equally blunt: there is no restriction on subsidised expenditure.
The one place aid-counting survives is the Northern Ireland ERIS variant. There the additional relief sits under a rolling de minimis ceiling, broadly €300,000 over three years for most businesses, counted group-wide with other de minimis aid. For grant-stacked NI companies that makes the combined total a live number to track. The variant is covered on ERIS explained.
What still deserves planning
- The loss-position arithmetic. Grant income changes profits and losses, which feeds the ERIS loss-making gate and surrender values. Same project, different funding mix, different route.
- Timing across the 2024 boundary. Multi-year projects spanning old and new periods carry both rule-sets; apportion with the calendar, not the memory.
- Contract terms in funded consortia. Grant collaborations often contract R&D between members, which triggers the entitlement rules regardless of the subsidy position: whose claim it is still has to be answered.
- Records that separate the streams. Funders audit deliverables; HMRC audits qualifying costs. One project file can serve both, provided cost coding keeps the streams distinguishable.
The clean summary for boards: take the grant. The tax system stopped punishing you for it, and what remains is ordinary planning, not a trap.
- HMRC guidance, Research and Development tax relief: the merged scheme R&D expenditure credit (subsidised expenditure not carried forward), gov.uk
- HMRC, CIRD121000 (ERIS: no restriction on subsidised expenditure), Corporate Intangibles Research and Development Manual, gov.uk
- HMRC, Enhanced R&D intensive support for loss-making SMEs based in Northern Ireland (de minimis aid limits), gov.uk
Frequently asked questions
We have an Innovate UK grant. Does it cut our R&D claim now?
For accounting periods beginning on or after 1 April 2024, receiving a grant covering part of your R&D costs does not reduce the relief available under the merged scheme, HMRC's guidance says so in terms. The grant itself is still taxable income in the normal way, which affects your loss position rather than your entitlement.
Does the same apply under ERIS?
HMRC's manual states there is no restriction on subsidised expenditure under ERIS either. The Northern Ireland ERIS variant is the exception in spirit: its de minimis aid cap counts the relief alongside other aid, so grant-stacked NI companies need to watch a combined ceiling.
Do old grant-affected claims stay wrong?
Pre-2024 periods keep the old rules: subsidised expenditure restrictions applied, and corrections or enquiries for those years must be reasoned in that world. The change is not retrospective.
So is grant-versus-claim planning dead?
The eligibility trap is dead; the arithmetic is not. Grants change your taxable position and loss profile, which feeds ERIS's loss-making gate and the value of surrender decisions. It is ordinary tax planning now rather than a cliff edge, but it is still planning.