My client is an SME and has received a grant in relation to the labour costs involved in a research and development project. They have allocated this to cover some of their subcontractor costs from an unconnected third party and so can we just claim 65% of this or is it blocked because it is subsidised?

The SME R&D expenditure scheme

Where a SME is looking to obtain tax relief for qualifying R&D expenditure this is usually obtained by obtaining an additional tax deduction for these expenses. This, in effect, increases the expenses to reduce income charged to corporation tax.