What R&D tax relief means now
Businesses still commonly search for “R&D tax credits”, but the rules have changed. For accounting periods beginning on or after 1 April 2024, claims are generally made under the merged R&D expenditure credit scheme or, for qualifying loss-making R&D-intensive SMEs, Enhanced R&D Intensive Support (ERIS).
The name of the scheme does not decide whether a project qualifies. The central question is whether the company sought an advance in science or technology and had to address scientific or technological uncertainty that a competent professional could not readily resolve.
Read Lexmore's guide to R&D tax reliefWhere qualifying R&D may arise in Cardiff and South Wales
Compound semiconductors and electronics
South Wales has a recognised compound-semiconductor cluster extending through Cardiff and Newport. Potential R&D may arise when companies develop new semiconductor materials, improve fabrication or packaging processes, address thermal or power-management constraints, or integrate components in ways that require a genuine advance in technology.
Routine production engineering, standard configuration and work whose solution is readily available would not qualify merely because it supports a high-technology product.
Software, AI and cyber security
Cardiff's digital economy includes software, data, AI and cyber-security businesses. Relevant projects can include attempts to resolve limitations in performance, scalability, interoperability, security or reliability where the solution was not readily deducible by a competent software professional. Creating a commercially novel app from established components is not automatically R&D.
Life sciences, diagnostics and medical technology
Companies working in diagnostics, medical devices, health data or precision medicine may encounter qualifying uncertainties in testing, measurement, materials, device performance or technical integration. Regulatory work and clinical administration do not qualify simply because they relate to an innovative product; the claim must isolate the activity directed at the scientific or technological uncertainty.
Advanced manufacturing and engineering
Manufacturers may carry out R&D while developing new products, materials, processes, control systems or methods of production. The useful evidence is normally found in design iterations, failed trials, test results, engineering decisions and the account given by the competent professionals, not in a generic description of the final product.
Examples are not an eligibility test
The sector examples on this page illustrate where qualifying work can arise. A company does not qualify because it operates in a particular industry or location, and commercial novelty on its own is not enough. Eligibility depends on the project, the state of knowledge in the relevant field, the uncertainties encountered, the work undertaken and the costs claimed.
Cardiff location does not change the tax test
A Cardiff address, membership of an innovation cluster or receipt of regional funding does not establish R&D eligibility. It may help explain the commercial and technical context, but the claim must still demonstrate an advance in science or technology, the uncertainties faced and the work undertaken to resolve them.
Could Patent Box also be relevant?
For South Wales companies developing and commercialising patented semiconductor, engineering, medical-device or other technology, Patent Box may reduce the Corporation Tax rate applied to qualifying relevant IP profits to 10%. A separate calculation and election are required. Patent ownership by itself is not enough, and the development, income-streaming and nexus conditions need to be considered.
Explore Patent Box tax reliefR&D tax relief questions from Cardiff companies
Does Lexmore need to be based in Cardiff to advise us?
No. R&D tax relief is a UK Corporation Tax relief and Lexmore serves businesses across the UK. The important issue is whether your adviser can understand the technical work, apply the rules correctly and remain accountable for the claim. We regularly travel to visit clients and, where an on-site meeting would help us understand your R&D properly, we are happy to make the journey. Meetings and document reviews can also be handled remotely where that suits you better.
Does being part of the South Wales semiconductor cluster mean our work qualifies?
No. It makes qualifying activity plausible, not automatic. Each project must be tested against the statutory definition, including the advance sought and the uncertainty a competent professional could not readily resolve.
Can grant-funded R&D still be included?
Potentially. The treatment depends on the accounting period, the scheme and the contractual and funding arrangements. A grant should be reviewed alongside the project before costs are allocated to a claim.
How Lexmore approaches a claim
Lexmore starts with an honest assessment of the project rather than an assumed claim value. We speak with the people who understand the technical work, establish the baseline that existed when the project began, identify the advance being sought and test whether the uncertainties meet the statutory definition.
We work with businesses across the UK and regularly travel to meet clients on site. Where practical, we prefer to see the operation for ourselves, meet the people behind the work and understand how the business develops its products, processes or technology. If an on-site visit would help us understand your R&D properly, we are happy to make that effort. Remote meetings remain available where they are more convenient or appropriate.
Where a claim is supportable, we then map the qualifying activity to the relevant costs, prepare the technical and financial evidence, support the Additional Information Form and work with your accountant on the Company Tax Return. Careful review is built into the process, and support is included if HMRC opens an enquiry into work we prepared.
Sources and further guidance
Unsure whether your project meets the R&D test?
Book a free initial assessment with Lexmore. You will get a straightforward view of the potential eligibility, the scheme and deadlines likely to apply, and what evidence a claim would need. If we do not believe the work qualifies, we will tell you plainly.