Research and development grants

Reviewed by Harinder Sandhu, EmpowerRD

Business team working on new project as part of research and development (R&D)

A research and development (R&D) grant can be an important element of funding the development of an innovative new product, service or process. The UK government offers some support for innovation. Grants may also be available from local and regional bodies as well as other organisations looking to support research and development.

To get funding, you will need to identify what different R&D grant schemes can offer you. You also need to understand the application process, and decide whether it is worth applying for a grant.

What can research & development grants fund?

R&D grants typically support the commercial development of an innovative product, service or process. The innovation doesn't necessarily have to be a completely new breakthrough, but routine improvements (such as minor product updates) are unlikely to get support.

Industry sectors like technology and projects such as improving energy efficiency may find it easier to attract a grant. But grants are available to support most types of innovation.

Grants often help fund:

  • a feasibility study
  • development of a prototype
  • collaboration with other businesses or with academic researchers

A grant will generally be awarded to support a specific, time-limited project rather than a broader innovation effort. Projects typically last between six and 36 months.

Grants don't usually cover the entire costs of a project. Instead a grant might be available for 20%-50% of the costs.

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Government R&D grants and support

The government offers a variety of research and development grants and support through UK Research and Innovation.

UK Research and Innovation regularly announces new funding competitions. These include:

  • projects tackling one of several key 'challenges' identified in the government's industrial strategy - for example, healthy ageing, better battery technologies, and new types of creative content such as virtual reality projects tackling the key challenges faced by developing countries
  • helping government organisations with their own innovative ideas
  • an 'open' programme that funds innovation in any sector

There is also funding for schemes such as Knowledge Transfer Partnerships, which help businesses work with academic institutions.

Find out more about how to apply for funding and  search for current innovation funding competitions.

While not strictly speaking a grant, most government support for innovation is given in the form of research and development tax relief. Tax relief can reduce a company's corporation tax bill or provide a payable credit if the business is loss-making. Small company tax credits can be worth as much as 33% of eligible research and development costs.

Research and development tax credits

Research and development tax credits enable profitable companies to reduce their tax bills by claiming the costs associated with certain research and development activity. The work must aim to make a scientific or technical advancement or overcome some scientific or technological barrier. To qualify for tax credits, you must trade as a limited company and be a small or medium-sized enterprise (you must have fewer than 500 employees and turnover below €100 million, or total assets below €86 million).

Tax credits are claimed as part of your corporation tax return and is 230% of eligible costs.

EU R&D grants and Brexit

Some research and development grants are provided by EU funding programmes, such as Horizon 2020 and Eureka Eurostars. The UK is no longer automatically part of these but is continuing to participate in some programmes.

Find out more about working on EU-funded projects.

Regional R&D grants

Separate R&D grant schemes may be offered locally in your region. These may be targeted at local priorities - for example, particular industry sectors or supporting local job creation.

Local organisations such as a Growth Hub can be a good first point of contact. They should be able to provide support for accessing both local and national R&D grants.

Other grants and support

There may be other grant funds available to suit your particular circumstances:

  • You may qualify for other local grant schemes (ie schemes not specifically aimed at R&D). For example, if your R&D project will also boost local employment.
  • Large companies and other organisations may be interested in funding your research. This is particularly true in sectors like pharmaceuticals and medical research.
  • Your professional or trade association should be a useful source of information on sector-specific grants. Some associations have their own schemes as well.
  • There are many business accelerators and incubators that support start-ups - particularly in the technology sector. They typically run regular competitions, with successful applicants being offered a combination of funding and support over a set period.

Applying for a grant

Applying for a research and development grant, or any grant scheme, can involve a substantial time commitment.

  • Outline the research and development you want to undertake.
  • Assess the funding required for the project you are planning, and what financing you can provide yourself. A grant provider will want to be convinced that your business is sound and your project financially viable.
  • Think about whether you want to apply yourself, take advice from a business support organisation, or use a grant consultant.
  • Investigate what schemes you might qualify for. Check whether any project costs might qualify for research and development tax credits or other tax reliefs as the grant could impact the value of your credits and reliefs.
  • Make a preliminary approach to the grant scheme to confirm details of what is funded and how to apply.
  • Decide whether to apply. Bear in mind that some grant competitions can be very competitive, with perhaps less than one in five applicants succeeding.
  • Make the grant application. For larger grants, this may involve a two stage process, with businesses that pass the initial screening going on to complete a longer, more detailed application.
  • Be prepared to wait. Depending on the scheme, a decision may take several months and you may need to provide proof of expenditure to claim reimbursement.

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