Grants are available on a wide range of business activities, providing funding that can enhance research and development, regional assistance, environmental aid and much more. Grants provide financial support to an entity to cover a percentage of eligible expenditure incurred on a project.
The percentage and nature of the eligible expenditure will be determined on a grant-by-grant basis and will be set out in an offer letter. Two of the most common grant-giving bodies for Scottish businesses are UK Research and Innovation (UKRI – commonly seen as Innovate UK) and Scottish Enterprise.
Grants are a great way to reduce the net outgoings on research and development projects of a business. Grants aren’t limited to businesses with a primary function of research and innovation or businesses at early / pre-revenue stages, so they can be used by more mature businesses undertaking projects which meet relevant criteria from grant-giving bodies.
Grant funding is generally set at a percentage of eligible expenditure up to a maximum amount, but may also include a minimum eligible cost expenditure. Consideration should be given to the cashflow impact on the business of seeking and accepting grant funding. Whilst a percentage of costs will be covered under the grant funding it is rarely 100% of the expenditure. Receipt of grant funding is likely to occur following a quarterly submission and expenditure has to be defrayed in the period, creating a cashflow timing difference that will need to be managed.
If the business is claiming R&D Tax Credits these could be impacted depending on the nature of the grant. It is always worth speaking to your tax advisor at an early stage of the process as the financial impact to the business may be more complex than the expenditure on the project less the total grant receipts.
The reporting requirements
Typically claims are submitted on a quarterly basis to the grant-giving body. As mentioned above, the terms of what qualifies as eligible expenditure is set out in an offer letter along with total expected eligible expenditure. The total value of the grant will determine how often an Independent Accountant’s Report needs to be submitted to the grant-giver. Frequency of reports can range from each quarterly grant claim to only being required for the final claim. It’s important to check what the requirements for Independent Accountants Reports are to avoid a delay in receiving funds.
Our audit team have extensive experience providing Independent Accountant’s Reports on grant claims to meet your obligation under the grant terms.
Maybe your business has recently received grant funding for the first time and you would like support to create systems to monitor the spend on the project, which feeds into the submission to the grant-giving body. We’re adept at being able to provide solutions to reduce the administrative burden on businesses of record keeping in a tailored and logistical manner.
If you have any questions, please contact our Entrepreneurial Tax team.