R&D Tax Relief

Key facts

R&D relief rewards companies that seek an advance in science or technology.
From April 2024, most claims go through the merged R&D scheme (20% above-the-line credit).
The work must involve resolving scientific or technological uncertainty — routine development does not qualify.
Claims must be supported by contemporaneous technical documentation.
A claim notification form is required for first-time and lapsed claimants.

What Qualifies as R&D?

HMRC follows the Department for Science, Innovation & Technology (DSIT) guidelines. To qualify, your project must seek an advance in overall knowledge or capability in a field of science or technology.^[3]

The advance must go beyond what a competent professional in the field would readily deduce. Three conditions must all be met:

Scientific or technological advance — the project aims to achieve something not already publicly available or deducible
Scientific or technological uncertainty — it was not obvious at the outset how the advance would be achieved, whether it could be achieved, or the most efficient method
Systematic investigation — the work is carried out in a systematic way by qualified personnel

Note: The advance must be in science or technology, not in the arts, humanities, or social sciences. Advances in business processes, economics, or management theory do not qualify.^[3]

Qualifying Expenditure

You can claim relief on revenue expenditure directly related to R&D activities. The main categories are:^[1]

Cost Category	What’s Included
Staff costs	Salaries, wages, employer NIC, and pension contributions for employees directly involved in R&D
Externally provided workers	Agency staff and staff providers — typically 65% of the payment qualifies
Subcontracted R&D	Payments to subcontractors for R&D work (restrictions apply depending on scheme)
Consumable items	Materials, utilities, and items used up or transformed in the R&D process
Software	Licences for software used directly in R&D
Cloud computing & data	From April 2023, costs of cloud computing, data licences, and pure mathematics research qualify

How to Claim

R&D relief is claimed through your company’s CT600 Corporation Tax return. The key steps are:^[1]

Identify qualifying projects — document why each project meets the advance-and-uncertainty criteria
Calculate qualifying expenditure — separate R&D costs from routine project costs
Submit a claim notification form — required if you are a first-time claimant, or have not claimed in the previous three accounting periods
Complete the additional information form — mandatory from 8 August 2023, providing project-level details to HMRC
Include the claim in your CT600 — enter the enhanced expenditure or credit in the relevant boxes

Tip: First-time claimants can apply for advance assurance from HMRC, which gives certainty that their first three claims will be accepted (subject to the information provided being accurate).^[4]

Relief Rates

From 1 April 2024, the merged R&D scheme applies to most companies. The key rates are:^[1]

Scheme	Period	Benefit
Merged scheme (RDEC-style)	From April 2024	20% above-the-line taxable credit
Enhanced R&D-intensive support	From April 2024	Additional payable credit for loss-making R&D-intensive SMEs (27% effective rate)
Former SME scheme	Before April 2024	130% enhanced deduction (reduced to 86% from April 2023)
Former RDEC	Before April 2024	20% above-the-line credit

The merged scheme credit is taxable income, so the net benefit for a profitable company paying 25% CT is an effective 15% cash saving on qualifying R&D spend.

Documentation Requirements

HMRC expects robust records to support your claim. Poor documentation is the most common reason claims are challenged or reduced.^[2]

Project descriptions — what the baseline state of knowledge was, and what advance you sought
Technical narrative — the uncertainties encountered and how you tried to resolve them
Financial records — detailed breakdowns showing how expenditure figures were calculated, split by cost category
Timesheets or time estimates — for staff splitting time between R&D and other activities
Contemporaneous records — created at the time of the work, not reconstructed after the fact

Common pitfall: Routine software development, system integration, or cosmetic changes do not qualify. The project must address a genuine technological uncertainty — “we didn’t know how to do it” is not the same as “a competent professional couldn’t readily work it out.”^[3]

Frequently Asked Questions

What qualifies as R&D for tax relief purposes?

The project must seek an advance in overall knowledge or capability in a field of science or technology, involve scientific or technological uncertainty, and be carried out systematically by qualified personnel.

How much is R&D tax relief worth?

Under the merged R&D scheme (from April 2024), companies receive a 20% above-the-line taxable credit. For a profitable company paying 25% CT, this gives a net benefit of 15p per £1 of qualifying spend.

What expenses can I claim R&D tax relief on?

Qualifying costs include staff salaries, employer NIC, pension contributions, subcontractor costs, consumable materials, software licences, and (from April 2023) cloud computing and data licence costs.

Do I need a claim notification form for R&D relief?

Yes, if you are a first-time claimant or have not claimed in the previous three accounting periods. The form must be submitted within six months of the end of the accounting period.

Does routine software development qualify for R&D relief?

No. The project must address a genuine technological uncertainty that a competent professional could not readily resolve. Routine development, system integration, and cosmetic changes do not qualify.

Sources

Corporation Tax: Research and Development (R&D) relief — GOV.UK
Corporate Intangibles Research and Development Manual — HMRC
Guidelines on the meaning of research and development for tax purposes — GOV.UK
R&D Tax Relief: advance assurance — GOV.UK