What are R&D tax credits?
R&D tax relief rewards UK companies that resolve scientific or technological uncertainty. It's not just for labs — software, manufacturing, engineering and even food science projects often qualify.
The merged R&D scheme (from April 2024)
For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes merged into a single R&D Expenditure Credit (RDEC) at a headline rate of 20% (effective benefit ~15% post-tax).
A separate Enhanced R&D Intensive Support (ERIS) scheme remains for loss-making R&D-intensive SMEs (R&D spend ≥ 30% of total expenditure) — giving up to 27% cash benefit.
What activities qualify?
HMRC's test: the project must seek an advance in science or technology that resolves uncertainty a competent professional couldn't easily work out.
Examples that often qualify:
- Building bespoke software with novel architecture
- Developing new manufacturing processes
- Trialling new materials or formulations
- Integrating systems where no off-the-shelf solution exists
Examples that don't qualify:
- Routine website builds or app development
- Cosmetic UI changes
- Market research, training, admin work
Qualifying costs
- Staff salaries, employer NIC and pension contributions (for staff working on R&D)
- Externally provided workers (with restrictions)
- Subcontractor costs (claimable for SMEs; restricted under RDEC)
- Software licences used in the R&D project
- Consumables — power, water, materials transformed in the process
- Data and cloud computing costs (added April 2023)
Claim mechanics
- Identify qualifying projects and competent professionals
- Quantify costs apportioned to R&D activity
- Prepare a technical narrative describing the advance and uncertainty
- Submit via the company tax return (CT600) and the Additional Information Form (AIF) — mandatory since August 2023
- Claim Notification Form required for first-time claimants
Recent compliance crackdown
HMRC has rejected a growing share of claims since 2023. Common failure points:
- Vague technical narratives that don't show real uncertainty
- Costs claimed for non-eligible workers
- No Claim Notification Form for new claimants
- Lack of contemporaneous evidence
Use a qualified adviser — speculative claims now attract enquiry and penalties.
Think you might qualify? Book a free R&D scoping call — we'll tell you upfront if it's worth pursuing.