Under GAAP the correct accounting treatment when a subsidy is received is that the subsidy is brought in as a receipt and the subsidised expenditure is recognised in full. Expenditure that is subsidised is therefore deductible in computing the profits of the trade and can attract R&D tax relief.

There is no provision in the large company scheme preventing subsidised expenditure from qualifying for R&D tax relief.

SMEs are able to claim R&D tax relief under the Research and Development Expendirute Credit scheme (CTA09/S104A(3)(b)), in respect of expenditure that is not allowed under the SME scheme if:

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