What are R&D tax credits?
R&D tax credits are a UK Government incentive designed to reward companies that invest in research and development. The scheme exists to encourage innovation across every sector, from manufacturing and software to life sciences and engineering.
What Counts as R&D?
To qualify as an R&D project, the project must seek an advance in science or technology by resolving a genuine scientific or technological uncertainty. This uncertainty must be something a competent professional in that specific field could not have been able to work out in advance.
The same guidelines apply if the project does not succeed. So even a failed attempt to improve a product, process or system could still be eligible for R&D tax relief. As long as the underlying R&D expenditure on the project meets HMRC’s definition of qualifying research and development.
In practice, this means you should look at the work your team did to overcome technical challenges, rather than just the finished outcome. If you were trying to building something new, something significantly better or adapt existing technology in a way that was not straightforward, you may have carried out qualifying R&D.
Which scheme applies to you?
Since 1 April 2024, most companies claim through the merged R&D scheme, which combined the old SME and RDEC schemes into a single above the line tax credit. Loss making, R&D intensive SMEs may instead qualify for the Enhanced R&D Intensive Support Scheme (ERIS). ERIS began on 1 April 2023 and pays a higher payable tax credit of up to 14.5% where qualifying expenditure meets the R&D intensity threshold. Any large company, or a business that does not meet the SME definition, claims under the new merged scheme.
How much can you claim?
R&D tax credits are paid by claiming back a proportion of your R&D expenditure either as a reduction in your profits subject to corporation tax or as a payable credit if the company is loss-making. Practically this provides a benefit of up to 16.2p for under the Merged Scheme and up to 26.9p under the ERIS scheme for every £1 spent on R&D expenditure.
How do I claim R&D tax credits?
The R&D tax credit is realised through your Corporation Tax Self Assessment return, alongside an additional information (AIF). The AIF is a requirement HMRC introduced on 8 August 2023 for every claim, regardless of size or scheme. Submit without one, and HMRC will remove the claim from your return until it has been submitted correctly.
Evidencing your claim
The additional information form asks for detailed evidence on both how your projects meet the R&D definition and how you have identified your qualifying R&D expenditure figures. This consists of a project by project breakdown, showing where the scientific or technological uncertainties and advances lay, as well as which costs (staff time, subcontractors, consumables, software and more) count as a qualifying research and development spent.
R&D tax relief is a powerful funding tool, but recognising what works and which costs qualify is rarely straightforward. Especially as the rules have shifted signficantly since April 2023 and April 2024.
Getting the technical narrative and the expenditure calculations right and importantly evidencing how you navigated the rules is what can separate a strong robust claim from an incorrect one. This is why the strongest claims begin with a clear and consistent structure. For each project you will need to set out:
- The baseline: What was the scientific or technological baseline at the start of the project?
- The advance: What were you trying to achieve technically that went beyond the baseline?
- The uncertainty: What could you not readily resolve at the outset, and why could competent professionals not solve it routinely or with known engineering principles?
- The work done: The experiments, iterations, tests and analysis you carried out to overcome the uncertainties and informed your next steps.
- The outcome: What you learned, what worked, what failed and how the result moved science or technology forward, even if the commercial project did not move forwards.
Once the technical story is clear, the qualifying expenditure can be come more clear to defend. HMRC will expect your cost schedule to mirror the projects described, with a sensible method to allocate time and other costs to R&D activities. Timesheets can be helpful, but where they do not exist you should document a reasonable alternative (examples include, project plans, sprint records, Git histories, lab notes, test logs or meeting minutes) and explain your approach.
It also helps to show how you have applied the recent changes correctly. In particular, you should be able to explain how you have applied the new subcontracting and removal of the subsidised expenditure rules, how you handle any overseas activity and why each of the new cost categories included directly links to qualifying R&D. Clear links between the evidence, materials, narrative and calculations give a methodical claim that is easy to follow, speeds up reviews, and makes it far easier to respond if HMRC raises any further questions.
We believe that the best way of delivering a robust R&D tax credit claim is through strong tax and technical expertise combined with a client-led approach. Our team and processes are built around truly understanding your business, so we can deliver meaningful results and ongoing support that adds real value.
The Process
1. Kick-Off
Your engagement begins with your dedicated client project manager walking you through the steps of preparing your claim. We will learn how your business works and your preferred communication styles, so our approach fits naturally into your own processes from the outset.
2. Project Assessment
To ensure your claim is accurate, thorough and built to withstand scrutiny, our technical experts will work with you to assess your projects for qualifying R&D activities. They will talk you through the legislation and how the rules are currently being interpreted. By asking the right questions, we can uncover qualifying work that might otherwise be missed.
3. Mapping Eligible Costs
To ensure that your claim reflects the full scope of your activities and stands up to review, our tax professionals will identify and match your qualifying costs to the relevant R&D projects. We understand your records may not be set up for this exercise, so we provide practical advice to help you track costs more effectively in the future.
4. Building Technical Case Studies
Well-crafted case studies bring credibility to your claim and help to safeguard it in the event of an HMRC enquiry. Our industry experts prepare clear, detailed case studies that align your project work with HMRC’s interpretation of the R&D guidelines. By combining hands-on sector experience with a strong grasp of legislative expectations, we ensure your projects are framed accurately and appropriately.
5. Completing the Claim & Submission
To provide you with complete visibility and confidence in the information provided to HMRC, we prepare all supporting documents required for your R&D credit claim. This includes a detailed report that outlines our methodology, the qualifying activities, and associated costs. Before submission, we walk through everything with you to ensure what’s being presented represents the work you have done.
6. Ongoing Support
We take a proactive long-term approach to R&D tax credits, giving you confidence in your claims and clearer visibility around your future incentives. We stay with you after submission to handle any HMRC enquiries and support any future strategic planning around your R&D tax credits.
Want to discuss your options?
- How long will it take to receive the money?
- Every single case is unique, however if you are committed to preparing the claim quickly, it can be completed and sent to HMRC in as little as 2 – 4 weeks. HMRC aim to process your claim within 40 working days of the submission.
- How much of my time will it take?
- Again each case is unique, however our process is designed to ensure that we minimise your time where possible. In most cases we can look to limit your and your team’s time commitment to a handful of hours.
- How do you structure your fees?
- We don’t believe in standard pricing, every R&D claim is different and our fees reflect the level of support required. We can promise that our fees are always flexible, fair and transparent. What matters most is that you receive value for money and a robust, defendable claim prepared by industry experts.
If you’d like a tailored estimate, book a chat with our team and we’ll happily provide one. - Can HMRC ask further questions?
- Yes. Your R&D incentives claim is submitted on your Corporation Tax return via the self-assessment mechanism. HMRC has the right to ask further questions about the return for 12 months from submission, if they feel they need further information to ensure the claim meets the guidelines. Facing an HMRC check? See our dedicated Enquiry Support service.