How UK R&D tax relief works, and how to claim it properly.

It is a government incentive that rewards UK companies for spending money on research and development. You work out the qualifying costs of a project that seeks an advance in science or technology, and the relief either reduces your Corporation Tax or, in some cases, is paid to you. Which route applies depends on your accounting period and your circumstances.

It can be any of these, depending on the scheme. The merged scheme gives a 20% expenditure credit that is taxable and is used first against your Corporation Tax. ERIS gives an extra deduction and, for loss-makers, a payable credit. Cash is paid only where the credit is not absorbed by tax liabilities and the other rules, such as the PAYE cap, allow it.

The relief is for trading companies chargeable to UK Corporation Tax that carry out a project meeting the definition of R&D. There is no requirement to be profitable, and loss-making companies can claim. The merged scheme is open to all eligible companies, while ERIS is limited to loss-making, R&D-intensive SMEs.

The relief described in HMRC's guidance is for companies within the charge to Corporation Tax. A sole trader or an ordinary partnership of individuals pays Income Tax, so it falls outside that guidance. If an unincorporated business is considering incorporating, the timing and structure are worth discussing with an adviser before you do. Ask us and we will tell you plainly.

No. A company that makes a loss can still claim, and the claim may produce a cash payment because the credit is used against liabilities and any balance is paid to the company. Being loss-making is also one of the conditions for ERIS. Profit-making companies generally use the credit to reduce their Corporation Tax bill under the merged scheme.

No. The Government's guidelines say that a failed project can still be R&D. What matters is that the project sought an advance in science or technology and that the work directly contributed to resolving scientific or technological uncertainty. Records of what you tried, and why it did not work, are often the strongest evidence of genuine R&D.

No. The test is about the project, not the setting. Software developers, engineers, manufacturers, food technologists and many others carry out qualifying R&D. The test asks whether the project sought an advance in overall knowledge or capability in a field of science or technology, and whether a competent professional could not readily have worked out the answer.

For accounting periods beginning on or after 1 April 2024, the merged scheme applies, or ERIS if the company is eligible. For earlier periods, the old SME scheme or the old RDEC scheme applies, and those still matter for late claims, amendments and enquiries. The start date of the accounting period is what decides it, not the date you claim.

The SME scheme and the old RDEC scheme were replaced by a merged expenditure credit scheme at 20%, plus enhanced R&D intensive support, or ERIS, for loss-making, R&D-intensive SMEs. The ERIS intensity threshold fell from 40% to 30%. New restrictions also apply to R&D work done overseas. Our history page sets out each change with its date.

Only for accounting periods that began before 1 April 2024. If your period began on or after that date, the merged scheme or ERIS applies and the old SME scheme is not available. Late claims for older periods remain possible within the time limit, so a company that has not yet claimed for an earlier year should check its deadline promptly.

Government guidance says companies receive between £15 and £27 for every £100 of qualifying spend. By our arithmetic, the merged scheme nets about £15 for a company paying Corporation Tax at the main rate and £16.20 for a loss-maker. ERIS can reach about £26.97 for an eligible company. The tax rates page shows the working.

Sometimes. Under the merged scheme the credit is applied in a set order, starting with the company's Corporation Tax, and only the balance is paid. A PAYE and NIC cap can also limit how much is paid out. ERIS gives a payable credit on surrendered losses, which is also subject to the cap unless an exemption applies. Cash is therefore possible but not guaranteed.

A claim is made for each period of account in which the company carries out qualifying R&D, so many companies claim every year. Each claim has its own time limit and, where it applies, its own claim notification and additional information form. Claiming in one year does not stop a claim in the next, though each one needs its own evidence.

HMRC checked 17% of R&D claims in 2023-24, up from 10% the year before, so a check is now common. Claims by first-time claimants have drawn particular attention. The best protection is a claim with clear project descriptions, supported costs and a record of how the figures were built, whether or not HMRC ever writes.

Keep project notes, test results and design documents showing what uncertainty arose and how it was resolved. Keep records of who worked on each project and for how long, plus invoices for consumables, software, cloud and subcontractors. Contemporary records are far more persuasive than reconstructions made at claim time, and they make the claim quicker to prepare.

Yes, if it is a trading company chargeable to UK Corporation Tax and carries out qualifying R&D. A pre-revenue company with a trading loss may also be eligible for ERIS if relevant R&D spend is at least 30% of its total relevant expenditure. Our ERIS intensity checker gives a first indication, and we can confirm the position on a call.

For periods beginning on or after 1 April 2024, HMRC states that there is no restriction on claiming subsidised costs under the merged scheme or ERIS, so grant funding does not itself block a claim. Capital spending is not claimable, but other allowances may apply to it. Our related reliefs section explains how the main ones fit around an R&D claim.

The company is responsible for its tax return and the claim in it, even when an adviser prepares the work. The additional information form names a senior internal contact, such as a director, and every agent who advised on the claim. We prepare the claim, a Chartered Tax Adviser reviews it, and the company approves what is filed.

Depending on the company, a claim notification may be needed before you claim, and an additional information form must be sent before or on the same day as the Company Tax Return. The claim itself then goes in the return. Missing the notification makes a claim invalid, and without the form the claim is not accepted, so both steps matter.

The claim is made through the Company Tax Return, CT600, and its computations. The additional information form must reach HMRC first, or on the same day, otherwise the claim is not accepted or is removed from the return. Your accountant normally files the return, so we work with them to make sure the right figures and forms go in at the right time.