The short answer
UK R&D tax relief supports companies undertaking qualifying research and development in science or technology. For accounting periods beginning on or after 1 April 2024, claims use either the taxable 20% merged RDEC or, for qualifying loss-making R&D-intensive SMEs, ERIS. Eligibility, qualifying expenditure, contract position, evidence and filing requirements must all be assessed together.
What is R&D tax relief?
Research and Development tax relief is a UK Corporation Tax incentive for companies undertaking qualifying research and development in science or technology. It can reward expenditure on work that seeks an advance in a field and has to resolve scientific or technological uncertainty.
“R&D tax credits” is the familiar umbrella term, but the statutory route now depends on the accounting period and the company’s circumstances. The relief is not a general innovation grant, and a commercially new or difficult project does not qualify automatically. The project test and the expenditure test must both be met.
Which R&D scheme applies now?
For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes were replaced by the merged R&D expenditure credit and Enhanced R&D Intensive Support. The same categories of qualifying expenditure apply to both current schemes, but their eligibility and calculations differ.
| Route | Who it is for | How the benefit works |
|---|---|---|
| Merged RDEC | Trading companies chargeable to Corporation Tax with a qualifying R&D project. This includes large companies and SMEs not using ERIS. | A taxable expenditure credit at 20% of qualifying expenditure. Because it is taxable, 20% is the gross credit rather than the final post-tax benefit. |
| ERIS | Loss-making R&D-intensive SMEs that meet the 30% intensity condition, including the connected-company rules. | An extra 86% deduction, producing a total 186% deduction, with a payable credit worth up to 14.5% of the surrenderable loss. |
The start date matters
An accounting period beginning before 1 April 2024 remains within the former SME or RDEC rules, even if the claim is prepared later. Those rules and rates changed more than once. Establish the exact accounting-period dates before applying any percentage or expenditure rule.
A company eligible for ERIS can choose merged RDEC instead, but cannot use both current schemes for the same expenditure. Both are also subject to the PAYE cap unless an exemption applies. The cap is generally £20,000 plus 300% of the company’s relevant PAYE and National Insurance liabilities for the period.
Who can claim?
The claimant must be a trading company chargeable to UK Corporation Tax and must incur eligible expenditure on a project that qualifies as R&D for tax purposes. A company can be loss-making and still qualify, although the way it receives value will depend on the applicable scheme and its tax position.
- 01
Confirm the claimant and period
Identify the company, its trade, its accounting-period dates and whether the current or former schemes apply.
- 02
Identify the field and baseline
Describe the science or technology and what knowledge or capability was publicly available when the work began.
- 03
Define the advance
Explain the appreciable improvement in overall knowledge or capability being sought—not merely what would be new to the company.
- 04
Establish the uncertainty
Show why a competent professional could not readily deduce whether or how the advance could be achieved.
- 05
Trace activity and cost
Set the R&D boundaries, identify direct and qualifying indirect activities, then connect only allowable paid costs to that work.
There is no list of automatically qualifying sectors. R&D can arise in many industries, but each project must satisfy the same science-or-technology test. Routine adaptation, aesthetic work, commercial uncertainty, market research and overcoming a lack of internal experience are not enough on their own.
What counts as R&D for tax purposes?
HMRC applies the DSIT Guidelines. The project must seek an advance in overall knowledge or capability in a field of science or technology and encounter uncertainty that is not readily deducible by a competent professional working in that field. From 1 April 2023, mathematical advances in themselves can be treated as science for this purpose.
Evidence of a qualifying project
- A defined field and contemporaneous technological baseline.
- A non-trivial advance recognised by a competent professional.
- Specific uncertainties at the level of the field, not only the claimant.
- Design, modelling, testing, analysis or adaptation undertaken to resolve them.
- Clear start and end points for each qualifying activity.
Commonly confused with R&D
- Commercial ambition or a product being new to the market.
- Work made difficult by deadlines, budget or staffing.
- Choosing between known tools or applying established methods.
- Routine debugging, maintenance, styling or optimisation.
- A failed commercial outcome without a qualifying technical uncertainty.
A wider commercial project may contain one or more narrower R&D projects. Qualifying work begins when activities start to resolve the scientific or technological uncertainty and ends when that uncertainty is resolved, or the work to resolve it stops. The full concept test is explained in What counts as R&D for UK tax purposes?
How much can an R&D claim be worth?
The value is driven by qualifying expenditure, the applicable scheme, tax position, PAYE cap and other statutory adjustments. It is not safe to promise a universal percentage. The examples below rebuild the old article’s £500,000 illustration with the assumptions made explicit.
Merged RDEC
£500,000 × 20% = £100,000 gross credit
At a 25% Corporation Tax rate, the simplified post-tax benefit is £75,000. At 19%, it is £81,000. Marginal relief and the seven-step credit calculation can change the actual result.
ERIS maximum illustration
£500,000 × 186% × 14.5% = £134,850
This 26.97% illustration assumes the company is a qualifying loss-making R&D-intensive SME and can surrender the full enhanced expenditure. Existing losses, the PAYE cap and other rules can change the amount.
The 20% merged RDEC rate is an above-the-line taxable credit. ERIS works through an enhanced loss and surrenderable payable credit instead. That accounting and tax distinction is why two claims with the same qualifying expenditure can produce different cash and financial-statement outcomes.
What costs can qualify?
Only paid costs in the statutory categories can qualify, and only to the extent they relate to direct R&D or specified qualifying indirect activities. The entire cost of a commercial project should not be included simply because it contains some R&D.
| Cost category | Potentially qualifying amount | Evidence and limits |
|---|---|---|
| Employees | The R&D proportion of salaries, wages, bonuses, employer pension contributions, secondary Class 1 NIC and qualifying staff training costs. | Role, activities and a supportable time or cost apportionment. Redundancy payments and routine clerical or maintenance work do not qualify. |
| Externally provided workers | Usually 65% of payments to an unconnected staff provider; connected-party claims use the lower of the payment and relevant provider cost. | Contracts, worker control, activities, connection status and where the work occurred. |
| Contractors | Usually 65% of qualifying payments to an unconnected contractor; connected-party rules use the lower relevant amount. | Who decided and planned the R&D, the contracted scope, actual activity, connection status and UK/overseas location. |
| Consumables | The qualifying proportion of fuel, materials, chemicals, ingredients, power and water used up in the R&D. | Usage and allocation records. Items sold or transferred are excluded. |
| Software | Licence fees wholly used for R&D, or a reasonable share where use is mixed. | Licence, users, purpose, usage period and allocation basis. |
| Data and cloud | For periods beginning on or after 1 April 2023, qualifying data licences and cloud computing such as storage, hardware facilities, operating systems and platforms. | The R&D use and allocation. HMRC excludes data and cloud costs used for qualifying indirect activities. |
| Clinical-trial volunteers | Payments to subjects of qualifying clinical trials. | Trial documentation, payment records and connection to the qualifying R&D activity. |
Current public guidance lists production and distribution, capital expenditure, land, patents and trademarks, rent, rates and leasing among costs that cannot be claimed through these R&D schemes. A cost may be commercially essential without falling within a qualifying statutory category.
What changed for contracted-out and overseas R&D?
For accounting periods beginning on or after 1 April 2024, the contracting analysis asks who decided that the R&D should be undertaken and who planned it. A customer can claim qualifying contractor costs for its own contracted-out R&D where the evidence supports that position. A contractor carrying out work within a contract can claim only where it made and planned the R&D decision and the customer neither initiated nor knew that R&D was needed to fulfil the contract.
This makes the wording of the agreement relevant, but not conclusive. Proposals, technical scoping, change controls, meeting records, risk ownership and what the parties actually understood can all help establish the facts. There should not be two claimants for the same contracted R&D.
Overseas expenditure: questions to resolve
- Did contracted R&D or an externally provided worker perform the activity outside the UK?
- Were conditions necessary for the R&D absent in the UK?
- Were those conditions present in the overseas location?
- Would reproducing them in the UK have been wholly unreasonable?
- Do Northern Ireland ERIS provisions change the analysis?
- Can the location, activities, payment and exception be evidenced?
Cost or workforce availability alone does not satisfy the overseas exception. The detailed rules, including the special position for some Northern Ireland ERIS claims, should be checked before expenditure is included.
Do grants or subsidies stop a claim?
For accounting periods beginning on or after 1 April 2024, HMRC states that there is no restriction on claiming subsidised costs under merged RDEC or ERIS. This differs from the former SME rules, where grants and notified State aid could alter which route applied to expenditure.
A grant still needs a separate review. Its terms may affect project accounting, the company may need to consider connected expenditure, and Northern Ireland ERIS is subject to additional State-aid and de minimis conditions. “Grant funded” should therefore not be treated as either an automatic exclusion or automatic approval.
What has to be filed with HMRC?
A valid claim is more than a figure in the Company Tax Return. The sequence and timing matter.
- 1
Check notification
For periods beginning on or after 1 April 2023, determine whether a claim notification is required. It commonly applies to first-time claimants or where the last claim falls outside HMRC’s three-year test.
- 2
Prepare the claim
Confirm the scheme, projects, qualifying activities, costs, connected parties, contracts, intensity and PAYE-cap position.
- 3
Submit additional information
Send an Additional Information Form for each accounting period before, or on the same day as, the CT600. If sent on the same day, the form must go first.
- 4
Submit or amend the CT600
Include the relief and the required return entries, computations and CT600L where applicable.
The claim notification period ends six months after the end of the period of account. The final claim deadline is generally 24 months from the last day where the period of account is 18 months or less; HMRC gives a separate 42-month calculation for longer periods of account. Filing close to a deadline leaves little room to correct a rejected or incomplete submission.
What should a robust technical case contain?
The Additional Information Form asks for the main field, baseline, advance, uncertainty, work undertaken and qualifying expenditure. Those headings should be supported by project evidence rather than filled with generic innovation language.
Technical narrative
- The precise field of science or technology.
- The public baseline at the project start.
- The advance sought against that baseline.
- Each uncertainty and why it was not readily deducible.
- The competent professional and basis of their view.
- Methods, tests, failures, results and project boundaries.
Financial methodology
- General-ledger population and qualifying-cost categories.
- Employee, contractor and software allocation methods.
- Contracts, connected parties and location of activity.
- Scheme, intensity and PAYE-cap calculations.
- Reconciliation to accounts, tax computation and AIF.
- Approvals and records retained for later enquiry.
Records created while the work is happening are usually more persuasive than a reconstruction prepared after the year end. Project plans, version histories, tickets, test results, design reviews, failed approaches and decision logs can make the technical chronology clear. HMRC’s eligibility checker also recommends retaining the information used to answer its project questions.
For help applying these rules to your business, explore our R&D tax relief claim service.
Frequently asked questions
Can a loss-making company claim R&D tax relief?
Potentially. A loss-making R&D-intensive SME may qualify for ERIS if it meets the SME, loss and 30% intensity conditions. Other loss-making claimants may use merged RDEC. The usable or payable amount remains subject to the scheme calculation, PAYE cap and the company’s facts.
Does an unsuccessful project qualify?
Failure does not prevent a claim. The test is whether the project sought a qualifying advance and attempted to resolve qualifying uncertainty. A failed method or abandoned project can help evidence uncertainty, but commercial failure alone does not create R&D.
Can any innovative company claim?
No. Business innovation is broader than R&D for tax purposes. The project must seek an advance in a field of science or technology and face uncertainty that a competent professional could not readily resolve using the public baseline.
Can cloud and data costs qualify?
They can for accounting periods beginning on or after 1 April 2023 where the licence or cloud service is used for qualifying direct R&D and the amount is reasonably apportioned. HMRC says these costs cannot be claimed for qualifying indirect activities.
Can a grant-funded project qualify?
For periods beginning on or after 1 April 2024, HMRC states that subsidised costs are not restricted under merged RDEC or ERIS. Earlier periods and Northern Ireland ERIS can require a different analysis, and the grant’s own conditions still matter.
Can we claim both merged RDEC and ERIS?
A company that qualifies for ERIS may choose merged RDEC, but it cannot claim both schemes for the same expenditure. Establishing the most suitable route requires the loss, SME, intensity, connected-company and credit calculations.
Is an Additional Information Form optional?
No. HMRC requires the form to support R&D claims. It must be submitted before or on the same day as the Company Tax Return; where both are sent on the same day, the form must be submitted first or the claim will be rejected.
Check the detail
Sources & scope
United Kingdom. The current-scheme sections apply to accounting periods beginning on or after 1 April 2024; data and cloud costs and project-definition changes noted here apply from periods beginning on or after 1 April 2023. Earlier periods remain under the former SME/RDEC rules. Northern Ireland ERIS, ring-fenced trades, connected companies, long periods of account and overseas activity can require additional analysis.
This is an InnoFund explanation, not official guidance or advice on a particular claim. The facts, relevant law and applicable scheme rules must be considered together.
Sources checked: 5 September 2026. This is separate from expert sign-off.
- HMRC: Corporation Tax Research and Development relief
Public overview and routes to the applicable scheme
- HMRC: Merged RDEC and enhanced R&D intensive support
Current schemes, 20% credit, 86% additional deduction, 14.5% payable credit, intensity and PAYE cap
- HMRC: Check if a project includes qualifying R&D activities
Project eligibility, competent professional and record keeping
- HMRC: Check what R&D costs you can claim
Current cost categories, subsidies, contracts and excluded expenditure
- HMRC: Tell HMRC you want to claim R&D tax relief
Claim-notification tests and six-month notification period
- HMRC: Additional information before an R&D claim
AIF timing, project descriptions, expenditure and intensity information
- HMRC: Make a claim on the Company Tax Return
Scheme dates, claim deadlines and CT600 filing steps
- HMRC DSIT Guidelines
CIRD81910; meaning of R&D for accounting periods beginning after 31 March 2023
- HMRC: Contractor payments
CIRD138000; current claimant, connected-party and 65% rules
- HMRC: Overseas restrictions
CIRD150500; overseas contractor and EPW restrictions and exceptions
- HMRC: ERIS rates
CIRD127000; 86% additional deduction and 14.5% payable credit
- HMRC: PAYE cap
CIRD140000; cap calculation and exceptions