R&D Tax Credits Explained
Your Company could be eligible for thousands of pounds in tax relief. Find out everything you need to know about R&D Tax Credits below:
What are R&D Tax Credits?
Research & Development (R&D) Tax Credits allow your company to recover a percentage of the money you’ve already invested in developing new products, processes, or solutions. You can claim this relief from HMRC, and it’s available to businesses of all sizes – from SMEs to large enterprises.
The UK’s R&D tax relief incentive was introduced back in 2000 to reward innovation and boost national economic growth. Since then, companies across a wide range of industries and sectors have received over £60bn in financial support through claiming R&D Tax Credits.
Why claiming R&D Tax Credits is important
R&D Tax Credits play a crucial role in helping UK businesses innovate and grow by reducing the cost of developing new products or solving technical challenges. In 2023-24, nearly 47,000 companies claimed back around £7.6bn in R&D tax relief.
R&D Tax Credits can help your business by:
- Providing a huge financial boost, helping you reinvest in people, equipment, and future research and development projects.
- Unlocking accessible funding without the need for loans, grants, or external investment.
- Accelerating growth, making it easier to get ahead of competitors and bring new services or technologies to market.
What types of Research & Development Tax Credits can you receive?
A successful R&D tax credit claim rewards your business for its innovation and research. Depending on your company’s circumstances, this can take the form of one of the following:
- Reduced Corporation Tax: Profit-making SMEs can lower their Corporation Tax bill.
- Cash credits: SMEs can receive valuable cash credits for eligible R&D work, with enhanced rates available for companies that meet the government’s R&D intensity criteria.
- Payable Tax Credit (RDEC scheme): Large companies may receive a payable credit under the RDEC scheme (applicable only to accounting periods which started before 1 April 2024).
Whether your business is an SME or a large company, R&D Tax Credits provide a way to turn your investment in innovation into tangible financial rewards.
Find the value of your claim
Your Company could be eligible for thousands of pounds in tax relief. Find out everything you need to know about R&D Tax Credits below:
Is your business eligible for R&D Tax Credits?
Your company may be eligible for R&D Tax Credits if it undertakes projects aimed at developing new or improved products, processes, or services. Even if your project is unsuccessful, this doesn’t affect eligibility to apply for R&D tax relief – what matters is the work you do to overcome technical or scientific uncertainties.
What counts as Research and Development for tax purposes includes:
- Projects seeking to achieve an advance in science or technology.
- Activities directly addressing scientific or technological uncertainties.
- Certain qualifying indirect activities that are necessary for the project.
Since HMRC’s definition isn’t always clear-cut, our R&D tax credit specialists can guide you through the rules and help ensure your business claims all eligible relief.
What are the qualifying costs for R&D Tax Credits?
To submit a successful R&D Tax Credit claim, it’s important to track all eligible project expenses. Below, we break down the eligible R&D expenditure:
- Cost of staff directly involved in the R&D work
- Cost of staff indirectly involved in the R&D (IT, admin and finance)
- Consumable items (materials, chemicals, ingredients, fuel, power and water)
- UK subcontractor costs
- Clinical trial volunteers
- Software costs
- Data licence and cloud computing costs
- Externally provided workers
- Staff costs unrelated to R&D work (e.g. redundancy payments)
- Consumable items whose ownership is sold or transformed
- Patent or trademark costs
- Rent or rates
- Overseas subcontractor costs (some exceptions can apply)
Source: Research and Development (R&D) tax relief for small and medium-sized enterprises – GOV.UK
R&D Tax Credit schemes
In 2024, the UK government introduced major changes to the R&D tax claim scheme. Depending on your accounting period, your business may be eligible under different R&D tax credit schemes:
R&D schemes before 1st April 2024
RDEC Scheme
- The RDEC scheme applies to larger companies
- Also applies to SMEs subcontracted to conduct R&D work
SME Scheme
- Applies to profit-making and loss-making SMEs
- R&D-intensive SMEs (spending 40% or more of total expenditure on R&D) are eligible for higher rates of R&D tax relief
R&D Schemes after 1st April 2024
Merged Scheme
- Combines the previous RDEC and SME schemes
Intensive Scheme
- Only available to SMEs spending over 30% of total expenditure on qualifying R&D activities
If you want to find out more about how your company will be affected by these changes, please get in touch with our expert team:
How often can you claim R&D Tax Credits?
You can make an R&D tax credit claim every year, and you can also backdate claims for the previous two accounting periods. For example, if your accounting period ends on 31st March, you would need to submit your R&D claim for the accounting period of 1st April 2023 – 31st March 2024 by midnight on 31st March 2026.
How long does it take to receive R&D Tax Credits?
HMRC aims to process 95% of all claims within 28 days, but this is dependent on the nature of your claim and even the time of year in which your claim is submitted, without longer wait times during December and March as a result of the number of companies whose accounting periods tie in to these busy periods.
Claims are processed more quickly when tax liabilities are reduced before profitable companies pay their Corporation Tax, or when losses are carried forward for future tax relief.
Claims are often thought of as ‘approved’ by HMRC, but most claims are automatically processed without intervention.
How much can my company claim in R&D Tax Credits?
The value of your R&D Tax Credits depends on your company’s size, R&D spend, profit status, and the scheme you fall under.
Check the values below for a rough estimate of the potential value of your Research & Development tax credit:
| Before 1st April 2023 | Between 1st April 2023 – 31st March 2024 | After 1st April 2024 |
| Component Type | SME scheme | RDEC scheme | SME scheme | RDEC scheme | ERIS scheme | RDEC scheme |
|---|---|---|---|---|---|---|
| Loss-making SMEs | Up to 33.35% | – | Up to 18.60% | – | – | Up to 16.20% |
| Profit-making SMEs | Up to 24.70% | – | Up to 21.50% | – | – | Up to 16.20% |
| R&D-intensive SMEs | – | – | Up to 26.97% | – | Up to 26.97% | – |
| Large companies | – | Up to 10.53% | – | Up to 15.00% | – | Up to 16.20% |
Find out the value of your claim
Any business in any sector can qualify. Discover how much you could be owed today!
Avoid costly mistakes by working with randd
Submitting an R&D claim without specialist knowledge can be risky, as mistakes like including non-qualifying costs or missing eligible expenditure may trigger HMRC enquiries and potentially reduce the value of your R&D Tax Credits.
R&D tax legislation is complex and constantly evolving, so working with experts can make a real difference. When you choose randd as your R&D tax credit specialist, you can benefit from:
- Minimised risk of enquiries or claim rejection – randd’s HMRC enquiry rate is just 3%, compared to the industry average of 20%.
- Fully transparent, bespoke consultations – we only submit claims we are confident in.
- A dedicated team of R&D Tax Credit specialists – we thoroughly research your project to build a strong claim and maximise your tax relief.
- Substantially more R&D tax relief than you would typically receive through an external accountant, agent, or self-submission.
The randd research and development tax claim process
With over 15 years in the industry, we have the specialist knowledge to support countless innovative businesses as they push the boundaries of technological development. We have successfully claimed back millions of pounds through our seamless, simplified tax claims process:
1. Eligibility check
1. Eligibility check
Using our tax credits calculator, you can check if your business qualifies for R&D tax credits, as well as receive an estimate of how much you could claim. You’ll then have a prequalifying call with an expert member of our team – once we establish you have qualified, we can issue a contract.
2. Compiling and submitting your HMRC claim
2. Compiling and submitting your HMRC claim
Once you have signed the contract, we will book an initial consultation within 1–2 weeks with one of our sector specialists. Throughout the process, our team of technical experts, financial analysts and tax consultants will gather the required details and work behind the scenes to craft a robust claim that maximises your R&D claim result.
3. Risk assessment
3. Risk assessment
We perform 3 different stages of risk assessment – at sign-up, at the first technical meeting and again before submission. We minimise any obstacles to ensure a smooth process and a successful claim, keeping you fully in the loop from start to finish.
What is Research & Development?
R&D, is an activity undertaken by companies when attempting to develop new products, processes, or services, or improve and optimise existing ones.
What about Tax Relief for creative industries?
Creative industry tax relief covers a group of eight Corporation Tax reliefs that permit eligible companies to increase the amount of expenditure they can claim.
Eligible R&D activities
Optimise your R&D tax relief with an expert team that handles R&D claims for a living.
R&D Tax Credits FAQs
How do I prove my project qualifies for R&D Tax Credits?
To claim R&D Tax Credits, HMRC requires evidence that your project involved qualifying research and development. You should keep records of the activities undertaken, the scientific or technological uncertainties addressed through your work, and associated costs, such as:
- Staff wages
- Consumables
- Subcontractor invoices
Submitting clear documentation helps maximise your R&D claim and reduce the risk of you receiving HMRC enquiries.
Can I claim R&D Tax Credits if my project fails?
Even if your project doesn’t achieve the desired results, you may still be eligible for R&D Tax Credits, as claims are based on the attempt to innovate rather than the outcome. You can learn more in our guide: do failed R&D projects qualify for tax relief?
Are R&D Tax Credits only for technology companies?
No. While software & IT companies are popular in the field, any company conducting qualifying Research & Development activities – from manufacturing to sports science – may be eligible.
Can I claim R&D Tax Credits alongside other government incentives?
Research & Development Tax Credits can often be claimed alongside other government incentives, such as capital allowances or innovation grants. However, the rules vary depending on your sector and the type of expenditure included in your claim.
Can I backdate R&D Tax Credit claims?
You can submit claims for up to the last two accounting periods, helping you recover R&D tax relief for past projects that haven’t yet been claimed.
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