What is R&D tax relief and who can claim it?▾
R&D tax relief is a UK government incentive that rewards companies for investing in innovation. Any UK limited company that carries out qualifying R&D activities can claim, regardless of industry or size. The work must seek to advance science or technology by resolving scientific or technological uncertainty.
What changed with R&D tax credits from April 2024?▾
From 1 April 2024, the SME and RDEC schemes merged into a single merged scheme with a 20% above-the-line tax credit for most companies. Loss-making SMEs that are R&D intensive can instead claim enhanced R&D intensive support (ERIS), worth roughly 27.0% of qualifying spend. For accounting periods beginning on or after 1 April 2024 the intensity threshold for ERIS is 30% of total relevant expenditure — it was 40% for periods beginning in the year before that, so a company between 30% and 39% intensity that was previously excluded may now qualify.
What is the R&D intensity threshold for ERIS?▾
A loss-making SME qualifies for enhanced R&D intensive support if its qualifying R&D expenditure is at least 30% of its total relevant expenditure, measured across the company and any connected companies. The threshold fell from 40% to 30% for accounting periods beginning on or after 1 April 2024, and there is a one-year grace period so a company that qualifies in one period does not lose relief immediately if intensity dips. ERIS gives an additional deduction of 86% and a payable credit of 14.5% of the surrenderable loss, which is worth about 27.0% of qualifying spend — well above the merged scheme. This calculator models the merged scheme only.
What counts as qualifying R&D expenditure?▾
Qualifying costs include: staff costs (salaries, NI, pension for employees working on R&D), subcontractor costs (65% of the invoiced amount for unconnected subcontractors, with different treatment for connected parties), consumable materials used in R&D, software licences used directly in R&D, and relevant payments to subjects of clinical trials. Capital expenditure does not qualify.
How much can I claim through R&D tax credits?▾
Under the merged scheme from April 2024, the gross credit rate is 20% of qualifying expenditure — but the credit is itself taxable, so nobody receives the full 20%. A profitable company paying 25% corporation tax keeps about 15% of qualifying spend. A loss-making company has notional tax deducted at the 19% small profits rate before the balance is paid out, so the cash received is about 16.2% of qualifying spend, not 20%. A PAYE and NIC cap can restrict the payable amount further.
What industries commonly claim R&D tax credits?▾
While tech and pharma are obvious, many industries claim R&D tax credits: construction (new building methods, materials testing), manufacturing (process improvements, new product development), food and drink (recipe development, shelf-life extension), agriculture (crop science, automation), and financial services (algorithm development, fintech).
Can I claim R&D tax credits for failed projects?▾
Yes, absolutely. R&D tax relief is about the attempt to resolve uncertainty, not the outcome. Failed projects, abandoned prototypes, and unsuccessful experiments all qualify as long as the work was seeking to advance science or technology. In fact, failure often demonstrates genuine technological uncertainty.
How far back can I claim R&D tax credits?▾
You can amend your corporation tax return to include an R&D claim for up to 2 years after the end of the accounting period. For example, for a year ending 31 March 2024, you have until 31 March 2026 to submit or amend the claim.
What records do I need to support an R&D claim?▾
HMRC expects: a written technical narrative describing the R&D projects and uncertainties, project-level cost breakdowns, timesheets or time allocation records for staff, evidence of subcontractor and consumable costs, and contemporaneous records (emails, lab notes, design documents). Good record-keeping from the start makes claims much easier.
Will HMRC enquire into my R&D claim?▾
HMRC has significantly increased compliance activity on R&D claims since 2023. All first-time claims and claims above certain thresholds are reviewed. Having a robust technical narrative, clear cost methodology, and supporting evidence dramatically reduces enquiry risk. Professional review before submission is recommended.
Can construction companies claim R&D tax credits?▾
Yes. Construction companies regularly claim for: developing new building techniques, testing innovative materials, creating bespoke engineering solutions, overcoming ground condition challenges, developing modular or offsite construction methods, and improving energy efficiency beyond standard practice. The key is demonstrating technological uncertainty.