What R&D tax relief is
R&D tax relief is a government incentive delivered through Corporation Tax. Companies that spend on qualifying research and development receive back a proportion of that spend, as a lower tax bill or, in defined cases, cash. The policy aim is simple: more private R&D than the market would fund alone. The machinery, after the 2023 and 2024 reforms, is precise and compliance-heavy. The plain-English tour of the current rules starts with the merged scheme explained. The pre-2024 history is parked, deliberately, in the old SME and RDEC schemes.
Who can claim it
The claimant must be a company within the charge to UK Corporation Tax, trading, and a going concern. Connected-company rules decide size where size matters. Sole traders and ordinary partnerships are outside the relief. The full set of company-level conditions, including the ones that catch groups and loss-makers, is on who qualifies.
What counts as R&D
The DSIT guidelines set the statutory definition: a project seeking an advance in overall knowledge or capability in a field of science or technology, through work whose outcome was not readily deducible by a competent professional. New-to-you is not enough, and routine difficulty is not enough. The test is applied project by project, with a defined start and end to the qualifying window. The definition, and what falls outside it, is on what counts as R&D for tax purposes.
The two current routes
For accounting periods beginning on or after 1 April 2024, most companies claim the merged scheme’s 20% taxable expenditure credit. Loss-making, R&D-intensive SMEs may instead use ERIS, an enhanced deduction with a payable credit behind three strict gates. Which route applies is a matter of conditions, not preference.
What it is worth
Headline rates overstate every scheme, and this one is taxable and capped. In practice the merged credit nets down to roughly 15p to 16.2p per pound, and ERIS to at most about 27p. The worked examples and the PAYE cap are on how much you can claim, and the calculator gives a guided estimate.
How a claim is made
The steps run in sequence. First the claim notification window, for first-time and lapsed claimants. Then evidence and records, the qualifying costs, the technical narrative and the mandatory Additional Information Form, then the return. The whole path, with deadlines, is on how to make a claim. The honest answer to whether you need an adviser at all sits beside it.
The honest thread
Every page in this guide carries the same undertone, and it is deliberate. Eligibility is conditional. Plenty of genuine work does not qualify. The company carries the responsibility, and HMRC checks claims after paying them. Three places carry that thread on purpose: when you do not qualify, red flags in your own claim, and the whole compliance and enquiries pillar. They are not the fine print of this guide. They are the point of it.
Frequently asked questions
Is R&D tax relief only for laboratories and tech giants?
No. It is for any company within Corporation Tax whose project seeks a genuine advance in science or technology through real uncertainty, and claims come from manufacturing, construction, engineering and software as much as from laboratories. The test is the work, not the industry.
Is it a grant?
No. It is a tax relief claimed through the Corporation Tax return after the spend has happened. Depending on route and position it reduces tax or pays a credit, and unlike a grant nobody approves it in advance: the company claims, and HMRC may check.
How much is it worth, roughly?
Under the merged scheme, about 15p to 16.2p net per pound of qualifying spend; under ERIS, for loss-making R&D-intensive SMEs, up to about 27p. Both figures depend on the qualifying base being right, which is where real claims are won and lost.
What is the biggest misconception?
That "we innovated" equals "we qualify". The statutory test is an advance in the field, not novelty to your business, and plenty of skilled, valuable work sits outside it. The honest half of this guide exists for exactly that reason.