Research and development (R&D) tax relief
Companies that spend money on qualifying research and development can claim it back through Corporation Tax, as a tax credit or, for some loss-making companies, as cash.
- No security
How it works
For accounting periods starting on or after 1 April 2024, there are two schemes.
- The merged scheme (RDEC): a taxable credit worth 20% of your qualifying R&D costs. It reduces your Corporation Tax bill, and can be paid out if you have no tax to pay.
- Enhanced R&D intensive support (ERIS): for loss-making small and medium-sized companies whose R&D spending is at least 30% of their total spending. You get an extra deduction of 86% of qualifying costs (186% in total), and can swap losses for a payable credit worth up to 14.5% of the loss you give up.
You claim through your Company Tax Return after the end of the accounting period. You must send HMRC detailed information about the claim before you claim, and if it is your first claim you may need to tell HMRC in advance (within 6 months of the end of the period of account).
Upsides and downsides
Upsides
- Nothing to repay and no shares given up
- Loss-making companies can receive cash, not just a lower tax bill
- Can be claimed every year you do qualifying R&D
Downsides
- You get the money after you have spent it, often many months later
- Only limited companies paying Corporation Tax can claim. Sole traders and partnerships cannot
- The rules on what counts as R&D are detailed, and HMRC checks claims closely
- Missing the claim notification deadline makes a first claim invalid
Risks
- HMRC can reject or reduce a claim that does not meet the rules
- Relying on the credit for cash flow before it is paid
What it costs
- How it is priced
- Tax relief on money you have already spent. Nothing to repay
- Costs that are easy to miss
- Time to identify qualifying projects and keep records of costs
- Adviser fees if you use one. Some charge a percentage of the claim, so compare how fees are worked out before you sign
- Payable credits are capped at £20,000 plus 300% of your PAYE and National Insurance bill for the period, unless an exemption applies
Depends on how much you spend on qualifying R&D. The credit is 20% of qualifying costs under the merged scheme.
Does it fit?
Could fit when
- You are a limited company developing new products, processes or technology
- You keep records of staff time and costs spent on R&D projects
- You are loss-making and spend a large share of your costs on R&D (for ERIS)
Unlikely to fit when
- You are a sole trader or partnership
- You need the cash before the end of your accounting period
- Your work is routine development rather than R&D as HMRC defines it
Who can use it
- Business types: Private limited company, Public limited company
- Open to businesses with no sales yet
- Must be a trading company that is chargeable to Corporation Tax
- The project must meet HMRC's definition of R&D
- ERIS is only for loss-making small and medium-sized companies that meet the 30% R&D intensity condition
- First-time claimants may need to send a claim notification within 6 months of the end of the period of account
Am I ready?
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- Records of R&D projects
- Records of qualifying costs
- Claim notification sent on time (first claims)
Regulation and protections
A statutory tax relief run by HMRC. HMRC checks claims and can reject or reduce them. You can challenge an HMRC decision through the normal tax appeal process.
Types of provider: HMRC (you claim through your Company Tax Return); Accountants and R&D tax advisers.
Also consider
Sources
- GOV.UK: R&D tax relief: the merged scheme and enhanced R&D intensive support · checked 7 October 2026
- GOV.UK: Tell HMRC you want to claim R&D tax relief · checked 7 October 2026