A company can claim R&D tax relief for a project that tries to make an advance in science or technology by resolving an uncertainty that a competent professional could not readily resolve. Under the merged scheme the company receives a taxable credit of 20% of its qualifying costs, worth about 15p to 16p in the pound after corporation tax. A loss-making company that spends at least 30% of its total costs on R&D can instead claim enhanced support: an extra 86% deduction and a tax-free payable credit of 14.5% of the loss it gives up. Two forms come before the return, one for every claim and one for first claims, and the second has a deadline six months after the year end.
- 20%taxable credit on qualifying costs under the merged scheme
- 14.5%tax-free credit for loss-making R&D-intensive SMEs
- 30%of total costs must be R&D to count as R&D-intensive
- 6 monthsafter the year end to send the claim notification form
What counts as R&D for tax.
The relief is not for being innovative in a general sense. It is for a project that seeks an advance in a field of science or technology, and does so by trying to resolve a scientific or technological uncertainty. Both parts have precise meanings, and HMRC applies them.
The advance
Science is the study of the physical and material world, and technology is the practical application of it. Since 1 April 2023 an advance in mathematics counts as science too. The advance has to be in the field as a whole, not just new to your company: creating a process, material, device, product or service that increases what the field knows or can do, or improving an existing one to a degree that goes beyond a minor or routine upgrade. Something another company has already developed can still be an advance if it is not publicly known or available.
The arts, humanities and social sciences, including economics, are outside the relief altogether.
The uncertainty
A scientific or technological uncertainty exists when an expert in the field cannot say whether something is possible, or how to do it, even after looking at everything that is already known. The yardstick is the competent professional: if a capable person working in that field could have worked it out from existing knowledge, there is no uncertainty and no R&D, however hard the project was for your company.
A problem is not an uncertainty if it can be settled in a discussion with peers. That is HMRC’s own phrase, and it draws the line for most software projects. Building an app or a website with known tools, however novel the business idea, is rarely R&D. Working out how to make a system do something the field does not know how to do can be.
Where the project starts and stops
For tax purposes the R&D begins when work starts on resolving the uncertainty and ends when it is resolved, or the attempt stops. Costs before that point, such as market research or deciding what to build, and costs after it, such as production and selling, are outside the claim.
The merged scheme, and enhanced support.
For accounting periods beginning on or after 1 April 2024 the old SME and large company schemes have gone. There are two reliefs, and a company that qualifies for the second can choose either, but not both on the same costs.
| Merged scheme | Enhanced R&D intensive support | |
|---|---|---|
| Who | Any trading company within corporation tax with a qualifying project | A loss-making SME whose R&D is at least 30% of its total expenditure |
| What you get | An expenditure credit of 20% of qualifying costs, paid or set against tax | An extra 86% deduction from profit, making 186% in all, and a payable credit of 14.5% of the loss given up |
| Is it taxed? | Yes. The credit counts as trading income, so it is worth 20% less corporation tax on it | No. The payable credit is tax free |
| Worth, per £1 of qualifying cost | About 15p at the 25% rate, 16.2p at the 19% small profits rate | Up to 26.97p, if the whole enhanced amount can be surrendered |
| Cap | The credit paid in a period cannot exceed £20,000 plus 300% of the company’s PAYE and National Insurance for the period, unless the company is exempt from the cap. Excess is carried forward. | |
What makes a company an SME, and intensive
An SME has fewer than 500 staff and either turnover under 100 million euros or a balance sheet total under 86 million euros, counting linked and partner companies. A company is R&D intensive if its relevant R&D costs are at least 30% of its total expenditure, including that of connected companies, for the period of the claim. A company that met the 30% test last year and claimed then can keep the status for a year in which it dips below.
How the merged scheme credit is used
The credit is not simply paid out. It is set against the company’s corporation tax for the year first, limited to the credit net of the tax on it, tested against the PAYE cap, and then set against any corporation tax owed for other years and any other amounts owed to HMRC, such as VAT. What is left is paid to the company, as long as it is a going concern.
Which costs you can claim.
| Cost | How much of it | Notes |
|---|---|---|
| Your own staff | The share of their time spent on the R&D | Salary, bonus, employer’s National Insurance, pension contributions and training. A developer who spends 60% of the year on the project gives a 60% claim on those costs. |
| Agency workers | 65% of the payment, if the provider is unconnected | Called externally provided workers. Their work must generally take place in the UK. |
| Subcontractors | 65% of the payment, if unconnected | Only if your company decided the R&D was needed and planned it. Work done abroad is excluded, with limited exceptions. |
| Consumables | The proportion used up | Materials, components, chemicals, power, fuel and water consumed by the R&D. Not items you go on to sell. |
| Software, data and cloud | A reasonable share | Licences, data licences and cloud computing used for the R&D, in proportion to that use. |
| Clinical trial volunteers | Payments to them | For trials of new drugs or medical techniques. |
Supporting work that forms part of the project, such as administration, finance, maintaining R&D equipment and preparing the findings, can be claimed too, but only the part of it that would not have been done anyway. A cost has to have been paid before the claim is made.
What is out
- capital spending, including the equipment itself, although capital allowances may apply to it
- land, rent, rates and leasing
- patents and trademarks
- producing and distributing the goods or services once the uncertainty is resolved
- work your company did under contract for a customer who decided the R&D was needed: the customer claims, not you
Grants no longer matter under the new rules. A project funded partly by a grant can be claimed in full, which was not the case under the old SME scheme.
A claim, worked through.
Worked example, accounting year to 31 March 2026
Leo’s company spent a year making a battery monitor work in conditions nobody had solved
Two engineers spent most of the year on it, an unconnected UK firm was paid £10,000 to test prototypes, and components, cloud computing and software were used up along the way.
- Qualifying costs
- The two engineers’ pay, National Insurance and pension, at their R&D share of the year£45,000
- Subcontracted testing: 65% of £10,000£6,500
- Cloud computing and software licences used for the project£3,500
- Components used up in prototypes£5,000
- Qualifying R&D expenditure£60,000
Profitable: the merged scheme
- Credit: 20% of £60,000£12,000
- Taxable profit of £30,000, plus the credit£42,000
- Corporation tax at the 19% small profits rate£7,980
- Credit set against that tax£7,980
- Credit left over, paid to the company£4,020
- Net benefit: £12,000 less £2,280 tax on it£9,720
Loss-making and R&D intensive: enhanced support
- Total costs £150,000, so R&D is 40%: intensiveYes
- Trading loss before the claim£20,000
- Extra deduction: 86% of £60,000£51,600
- Loss after the deduction, which is less than 186% of the costs£71,600
- Give up the loss for a payable credit at 14.5%£10,382
- Paid to the company, tax free£10,382
In the profitable case the credit is worth 16.2% of the costs, because the company pays the 19% rate. At the 25% main rate it would be 15%. In the loss-making case the company gives up a £71,600 loss that would otherwise have reduced future profits, so the £10,382 is money now in exchange for relief later, and a company expecting profits soon may prefer to keep the loss and claim the merged scheme credit instead.
Both figures assume the PAYE cap is not in point. With two salaried engineers it is well above either credit.
How to claim, and when.
- Claim notification form. Needed if the company has never claimed, or its last claim was more than three years before the end of the notification period. The period runs from the first day of the period of account to six months after its end. Miss it and the claim is invalid, whatever the return says.
- Additional information form. Needed for every claim. It names the senior person responsible for the claim and every agent involved, sets out the qualifying costs by category, and describes the projects: the field, the baseline, the advance sought, the uncertainties and how the company tried to resolve them. With one to three projects, all are described; with more, at least three covering at least half of the costs. It has to be sent before or on the same day as the company tax return, and before it on that day, or the claim is removed.
- The company tax return. The credit or deduction goes into the computation, boxes 656 and 657 confirm the two forms were sent, and the supplementary pages CT600L go in with a merged scheme claim or a payable credit. The claim can be made up to 24 months after the end of the period of account, for periods of 18 months or less.
The dates, for a company with a 31 March 2026 year end
A first claim
- Period of account1 April 2025 to 31 March 2026
- Claim notification form, from 1 April 2025 until30 September 2026
- Additional information formBefore the return
- Corporation tax due, nine months and a day after the year end1 January 2027
- Last day to claim, by return or amendment31 March 2028
Advance assurance
An SME that has never claimed, with turnover under £2 million and fewer than 50 employees, can ask HMRC for full claim advance assurance before it claims. HMRC discusses the R&D on a call and, if it agrees, the assurance covers the first three accounting periods. A refusal cannot be appealed. A targeted version, covering up to two specific areas of a claim, is running as a pilot until May 2027, including for SMEs that have claimed before.
Before you claim.
R&D relief has been claimed wrongly often enough that HMRC now checks claims closely, and GOV.UK says plainly that an ineligible claim may bring a penalty. The additional information form exists so that every claim states who prepared it and what the science was. Before you claim, have these in place.
- A competent professional who can explain the uncertainty. The technical description should come from the person who did the work, in their words, and say why the field did not already know the answer.
- Records made at the time. Timesheets or a reasonable time split for staff, invoices for subcontractors and consumables, and notes of what was tried and what failed. A claim built from memory a year later is the kind HMRC tests.
- The costs paid. Unpaid costs cannot be claimed.
- The dates in the diary. The claim notification deadline falls six months after the year end, often before the accounts are finished. A first-time claimant that misses it has lost the year.
If a claim turns out to be wrong
Within the time limit for amending the return, correct it. After that, HMRC runs an R&D disclosure service for companies that claimed too much: tax and credits are repaid with interest and a penalty that depends on whether the company took reasonable care, going back four years, or six if it was careless. A deliberate overclaim goes through a different facility, and waiting for HMRC to find it costs more.
Be careful of a claim you did not write. Every agent who advised on, costed or prepared a claim has to be named on the forms, and HMRC can ask the company, not the agent, to justify it. If someone tells you that a project qualifies before they have asked what the uncertainty was, they have not applied the test.
Questions, answered.
Yes, if it is within corporation tax, is trading, and has a project that seeks an advance in science or technology by resolving a scientific or technological uncertainty. Size does not bar a company from the merged scheme. Being a small or medium-sized company matters only for enhanced R&D intensive support and for advance assurance.
Under the merged scheme, 20% of the qualifying costs as a taxable credit, which is worth about 15p in the pound after corporation tax at 25%, or 16.2p at the 19% small profits rate. A loss-making company whose R&D is at least 30% of its total costs can claim enhanced support instead: an extra 86% deduction and a tax-free credit of 14.5% of the loss it gives up, worth up to about 27p in the pound.
It can, if the project tries to achieve something the field of software technology does not already know how to do, and a competent professional could not readily have worked it out. Using established tools and methods to build an app, a website or a system, however useful or new to your business, is not R&D for tax purposes.
A short online form telling HMRC that the company intends to claim. It is needed for a first claim, or where the last claim was more than three years before the end of the notification period. It can be sent from the first day of the period of account and must be sent within six months of the end of it. Without it, a claim that needs it is invalid.
HMRC asks for the evidence behind the technical description and the costs, and can remove the claim from the return and charge a penalty if the project or the costs do not qualify. If you find a claim was too high, correct it within the amendment window, or use the R&D disclosure service after that: the relief is repaid with interest and a penalty that depends on how the error arose.
Keep reading.
Every figure in this note was checked against GOV.UK on 30 September 2026 and is for the 2026 to 2027 tax year unless it says otherwise. Desk Notes are general guidance for the UK, not advice on your own situation.
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