Every month we meet founders who have heard there is "free money" available for UK businesses and want to know how to get it. There is money. Some of it is worth going after. But two things are usually misunderstood: what a grant actually costs you, and what R&D tax relief actually is.
Grants: real money, with strings
A grant is a competition. You are scored against other applicants by assessors working from published criteria, and the winners get funding for a defined project with defined costs. Three things to know before you start:
- Most grants pay in arrears. You spend first and claim back. If your cash flow cannot carry the project for a few months, the grant can put you under strain rather than relieve it.
- Many need match funding. The grant may cover a share of eligible costs, and you have to show where the rest comes from.
- There is reporting. Quarterly claims, evidence of spend, sometimes an independent accountant's report. Budget the time.
Where to look: Innovate UK competitions for genuinely innovative projects, regional and local growth programmes, and sector bodies in areas such as clean energy, health and the creative industries. Government-backed Start Up Loans are often mentioned alongside grants; they are loans, not grants, but for very early businesses they can be the more realistic route.
What makes an application win
Assessors score the application against the competition's aims, not yours. The winning applications we have been part of share the same features:
- A project that fits the call exactly. If the call is about reducing industrial emissions, a project that "also" reduces emissions will lose to one built around it.
- A clear plan with milestones, named people and costed work packages. Vague ambition scores badly.
- Evidence. Customer conversations, pilot results, letters from partners. Assessors are told to look for proof, so give them some.
- A credible route to commercial impact: who buys it, at what price, and what the project changes.
Read the scoring guidance and answer each question as asked. Applications fail more often on not answering the question than on the idea itself.
R&D tax relief: what it is for
R&D tax relief is for companies doing work that tries to achieve an advance in science or technology by resolving a scientific or technological uncertainty. That is a narrow test. Building an app, redesigning a product or doing something that is new to your business but routine for a competent professional in the field is not R&D for tax purposes, however hard it was.
Where a company does qualify, the relief can be significant, and loss-making companies that spend heavily on research can receive a payable credit. The scheme was reformed for accounting periods starting on or after 1 April 2024, and the rules on what counts and who can claim have changed more than once, so take current advice rather than relying on what a friend claimed two years ago.
The part most founders miss
HMRC now checks R&D claims far more closely than it used to. A claim needs a technical narrative that explains the uncertainty and how you tried to resolve it, records kept at the time, a named competent professional who can defend the work, and an additional information form submitted before the claim. Claims without these are being opened, and penalties fall on the company, not on whoever prepared the claim.
That matters because of the cold calls. If someone you have never met promises you a guaranteed claim for a percentage of the refund, be careful. We prepare claims with specialist partners who will tell you when work does not qualify, which is sometimes the more valuable answer.
Tell whoever prepares your R&D claim about any grant you have received. The two interact, and silence here causes problems later.
Where to start
If you are considering a grant, start with the competition brief and the scoring guidance before you write a word, and be honest about whether your cash flow can carry the project. If you think your work might qualify for R&D relief, write down the technical uncertainty in one paragraph. If you cannot, that is your answer. For either, book a complimentary consultation and we will tell you whether it is worth pursuing.