R&D Tax Relief Guide
Your Complete Guide to Understanding and Claiming R&D Tax Relief
What is R&D Tax Relief?
R&D (Research and Development) tax relief is a UK government incentive designed to support innovation. It allows eligible UK companies to reduce their Corporation Tax bill, or in some cases, receive a cash credit, in recognition of qualifying R&D activity.
Understanding the Merged Scheme (From April 1, 2024)
As of 1 April 2024, most UK companies now claim R&D tax relief through a single merged scheme, replacing the previous SME and RDEC routes.
Relief is typically worth around 15% of qualifying R&D expenditure for profit-making companies (after tax), or up to 20% as a cash credit for loss-makers.
| Accounting Period Start Date |
Applicable Scheme |
Key Benefits |
| Before 1 April 2024 |
SME Scheme or RDEC |
Enhanced relief for SMEs (~25%–33%), RDEC for larger companies (~10%) |
| On or after 1 April 2024 |
Merged Scheme |
20% above-the-line credit (taxable). Net benefit ~15% for profit-makers, up to 20% cash credit for loss-makers |
| 30%+ R&D spend companies |
Enhanced R&D Intensive Support (ERIS) |
Higher cash credit for loss-makers, worth up to ~26.6% of qualifying expenditure |
What Qualifies as R&D?
HMRC defines R&D as activities that aim to achieve an advance in science or technology through the resolution of uncertainty. Common qualifying activities include:
- Developing or improving software platforms or systems
- Creating new materials or products
- Enhancing manufacturing processes for efficiency or sustainability
- Adapting existing technologies for new applications
- Overcoming technical challenges where no obvious solution exists
Important: Even projects that don't succeed can still qualify — it's the attempt to solve a problem that matters.
Who Can Claim?
R&D tax relief applies across a wide range of industries:
- Manufacturing & Engineering: Developing new products, materials, or improving production processes
- Software & IT Development: Building new digital platforms, systems, or solving technical challenges in code
- Renewable Energy & Cleantech: Improving energy efficiency, reducing emissions, or developing clean technologies
- Construction & Architecture: Innovating in building design, materials, or construction techniques
- Life Sciences & Pharmaceuticals: Conducting medical research, developing treatments, or improving formulations
- Food Production & Processing: Enhancing shelf life, food safety, or production efficiency through technical changes
Grants and Subsidies
Even if your R&D is subsidised — for example, through a grant — you can still claim under the merged scheme. The old restrictions on SME claims for subsidised projects no longer apply.
Enhanced R&D Intensive Support (ERIS)
Companies that spend at least 30% of their total costs on qualifying R&D may be eligible for Enhanced R&D Intensive Support. This can increase the cash credit rate for loss-making businesses to around 26.6%.
Qualifying Costs
R&D tax relief can cover various types of expenditure directly related to R&D activities:
- Staff costs (salaries, NI, pension contributions for employees working on R&D)
- Subcontractor costs (65% of payments to subcontractors for R&D work)
- Software costs (software used directly in R&D)
- Consumables (materials consumed or transformed in R&D)
- Utilities (proportion of electricity, gas, water used for R&D)
HMRC Compliance
R&D tax relief is a regulated area that demands accuracy, clarity, and sound judgement. Key compliance requirements include:
- Detailed technical and financial records
- Clear project documentation
- Robust cost allocation methods
- Understanding of qualifying activities
- Preparation for potential HMRC enquiries
Why Work with Lexmore?
Expert Knowledge
Our depth of knowledge means we spot opportunities others often overlook, ensuring your claim is as complete and accurate as it should be.
HMRC Compliance
We prepare robust, HMRC-compliant claims that stand up to scrutiny, giving you confidence and peace of mind.
Year-Round Support
We're with you beyond submission deadlines, offering ongoing guidance and strategic input as your business evolves.
Partnership Beyond Compliance: We work in genuine partnership with you — not just to identify relief today, but to strengthen your processes and get the most from opportunities for the future.
