Who Can Claim R&D Tax Credits?
Understand the eligibility criteria for the UK’s Research and Development tax credit schemes.
What Are R&D Tax Credits?
R&D Tax Credits are a UK government incentive designed to support companies investing in innovation. They offer tax relief on qualifying research and development expenditure, either as a Corporation Tax reduction or, for some companies, a direct cash payment.
This incentive is available to businesses of all sizes and across all sectors, from early-stage tech start-ups to large-scale manufacturers. The key factor is not the industry you operate in, but whether your company is genuinely seeking to make advances in science or technology through structured R&D activity.
Who Can Claim R&D Tax Credits?
Before diving into the details of the scheme itself, it’s important to confirm whether your business meets the basic eligibility requirements. To make a claim, HMRC requires that:
- Your business is a UK limited company and subject to UK Corporation Tax.
- You’ve carried out qualifying R&D activities, as defined by the Department for Science, Innovation and Technology (DSIT) Guidelines.
- You’ve incurred qualifying R&D expenditure, which could include staff costs, consumables, subcontractor payments, or software expenses.
- Your company is a going concern at the time of the claim (not in administration or liquidation).
It’s also worth noting that profitability is not a requirement. Both profit-making and loss-making businesses can claim, although the form of relief differs. For loss-making SMEs that qualify as R&D-intensive, there’s a separate support stream that could provide valuable cash support.
Which Scheme Applies to You?
From April 2024, there are two possible routes for claiming relief, depending on your company’s financial position and level of R&D activity:
1. Merged RDEC Scheme
This is now the default route for most businesses.
- Offers a 20% above-the-line taxable credit on qualifying R&D expenditure.
- The credit appears in your profit and loss account, offering transparency to stakeholders and investors.
- Since the credit is treated as taxable income, the net benefit will typically be lower than the headline rate.
- If your company is loss-making, HMRC applies a notional tax deduction at the 19% small profits rate, not the standard 25%.
2. Enhanced R&D Intensive Support (ERIS)
This pathway is specifically for loss-making SMEs that are heavily engaged in R&D.
- To qualify, at least 30% of your total business expenditure must be on qualifying R&D (reduced from 40% before April 2024).
- Offers a 186% deduction of qualifying expenditure and a 14.5% repayable credit on surrenderable losses.
- Includes a grace period: if you met the 30% threshold in the previous year but fall slightly below it this year, you may still be eligible.
This distinction matters. While the Merged RDEC applies broadly, ERIS is designed to ensure that high-intensity, loss-making innovators continue to receive meaningful support.
What Makes an R&D Project Qualify?
Meeting the general scheme requirements is only one part of the process. For your claim to succeed, the project itself must meet HMRC’s definition of R&D as outlined in the DSIT guidelines.
- The project must aim to achieve an advance in science or technology, not just for your company but for the wider field.
- It must involve scientific or technological uncertainty, where a qualified professional cannot easily deduce the outcome at the outset.
- Routine work, cosmetic changes, or applying existing knowledge in a straightforward way won’t qualify.
- Since April 2023, mathematical advances are also recognised as scientific in nature, expanding the types of activity that may qualify.
Your project does not have to succeed to qualify. The key is that genuine uncertainty existed and that the work was structured in an effort to resolve it.
Claim Notification Requirement
Since April 2023, certain businesses must notify HMRC in advance if they plan to make a claim.
You’ll need to submit a Claim Notification if:
- You’re claiming for the first time, or
- You haven’t submitted an R&D claim in the last three accounting periods.
This must be done within six months of the end of the accounting period in which the R&D took place. It’s a short online process that requires:
- Basic company information (including your UTR),
- Contact details for the person leading the R&D,
- A short summary of the R&D activity.
If you miss this deadline, your claim will be invalid – regardless of whether your project qualifies.
Additional Information Form (AIF)
- A detailed breakdown of qualifying R&D costs by category (e.g. staffing, software, subcontractors),
- Names of the competent professionals responsible for the work,
- Descriptions of your R&D projects. At least one must be described in full, with others included until at least 50% of qualifying costs are covered,
- A signed declaration confirming the accuracy of the information.
Claims submitted without a completed AIF will be automatically rejected. For many companies, this introduces a step change in how technical activity is documented and justified.
Get Started Today
Ready to unlock the full value of your R&D work? Contact Streets Innovation today for a free consultation. We’ll assess your eligibility, simplify compliance, and help you claim what you’re entitled to.
