Grant funding for business

The number and type of funding schemes available across the country are vast and ever changing. Many businesses can easily miss out on some extremely useful opportunities to help support the growth of their business, for many different reasons. Common reasons will include; not knowing what is out there, uncertainty about what is suitable for their business or even fear of the application process.

There are however some great tools available to help you find out what is available and what is suitable. For example, the Government has a useful Finance and support for your business tool on their website which filters down over 500 available schemes based on your needs, location, size and activity. Another, local example is the Cumbria Business Growth Hub’s funding tool.

Grants will usually be applied for a specific project or purpose and have some advantages over other sources of funding. Grants won’t need to be paid back and save your business interest costs, which might otherwise be charged on other sources of finance. You aren’t likely to be giving away any control or security to the funder either.

Whilst there may be a lot of competition for some grants and the process can be time-consuming, most funders will provide very good support in order to maximise your chances of obtaining the funding. Other examples of programmes which provide support are those provided to SME’s by Britain’s Energy Coast, Innovus, Cumbria Local Enterprise Partnership or Scottish Enterprise.

Grant funds will be applied for all sorts of different business purposes including for employment, marketing, professional services or capital items, but Research & Development (R&D) and Innovation is one area which is being considerably encouraged. There are also generous tax reliefs for R&D and it is a common misconception that you cannot have both a grant and the additional tax relief. Whilst the additional tax relief is not as generous as it would have been, none the less some additional relief may be available.

The tax treatment of grant funding is also a common query. Grants will be subject to normal taxation rules but the treatment differs between trading and capital grants. Grants received to cover revenue expenditure will be treated like normal trading receipts. In this case the grant reduces the tax relief due on the expenditure, and if it covers the whole cost, there will be no tax relief left available. Grants for capital expenditure will normally not be trading receipts and will reduce the qualifying expenditure for capital allowances purposes. In this case, if the grant covers the whole cost of the capital asset, no capital allowances will be available.

For VAT purposes, grants are outside the scope of VAT and no VAT will be payable. The input VAT on the underlying expenditure will however still usually be reclaimable if it relates to a VAT trade.

If you’re considering your options with regards grant funding available to you and your business and you’d like to discuss how we may be able to help you, please don’t hesitate to get in touch with us at any of our offices.