R&D tax relief is one of the most valuable — and most underused — reliefs available to UK limited companies. HMRC processes billions of pounds in R&D claims each year, but many eligible businesses, particularly smaller owner-managed companies, never claim because they assume their work does not qualify or find the process too complex without specialist help.
This guide cuts through that. Here is what qualifies under the 2024-onwards merged scheme, what costs you can claim, and how to make a submission as a limited company director.
What is R&D tax relief?
R&D tax relief is a government incentive that allows UK limited companies to claim a tax credit based on qualifying research and development expenditure. The scheme is designed to encourage innovation by reducing the effective cost of projects that advance science or technology.
Critically, "research and development" under HMRC's definition is considerably broader than most directors assume. You do not need a laboratory or academic researchers. You need a project that sought to resolve a scientific or technological uncertainty — meaning a problem where the solution was not already known or readily available to a competent professional in the field.
The merged scheme from April 2024 — what changed
Prior to April 2024, there were two separate R&D schemes: the SME scheme and the Research and Development Expenditure Credit (RDEC) for large companies. From 1 April 2024, HMRC merged these into a single scheme for most companies, with a separate Enhanced R&D Intensive Support (ERIS) scheme for R&D-intensive loss-making SMEs.
| Scheme | Who it applies to | Credit rate (from April 2024) |
|---|---|---|
| Merged scheme | Most UK limited companies — profitable or loss-making | 20% above-the-line credit on qualifying expenditure |
| ERIS | Loss-making SMEs where R&D spend is 30%+ of total expenditure | 27% above-the-line credit |
Under the merged scheme, qualifying companies receive a 20% taxable credit on qualifying R&D costs. For a profitable company paying 19% corporation tax, this effectively reduces the net cost of qualifying R&D by approximately 15p per pound spent. Loss-making companies can surrender the credit for a cash payment.
What counts as qualifying R&D?
This is where most directors underestimate their eligibility. HMRC's guidelines use the BEIS definition, which focuses on whether your project sought to achieve an advance in science or technology by resolving a genuine scientific or technological uncertainty.
In practice, qualifying work commonly includes:
- Developing new software or technical systems where the solution was not readily available — not customising off-the-shelf tools, but genuinely solving a technical problem without an obvious existing answer
- Creating new products or substantially improving existing ones through technical innovation
- Engineering or manufacturing processes that required solving problems where standard approaches were insufficient
- Building bespoke integrations, APIs, or technical architectures where the technical approach required genuine experimentation
- Developing algorithms, data models, or AI systems where the outcome was technically uncertain at the outset
The key test: was the outcome of the project technically uncertain at the start? If a competent professional in the field could not have predicted the solution in advance, the work likely qualifies.
What does NOT qualify
- Routine software development using established techniques (building a standard website, configuring existing platforms)
- Market research, commercial development work, or business strategy
- Activities that duplicate solutions already publicly known and available
- Compliance work where the technical solution is already established
- Business administration, finance, or HR systems that do not involve genuine technical innovation
What costs can you claim?
Qualifying R&D expenditure under the merged scheme includes:
- Staffing costs: Salaries, employer NI, and pension contributions for employees directly engaged in R&D. For a sole director undertaking qualifying R&D work personally, your own salary costs are claimable against qualifying time.
- Subcontractor costs: 65% of payments to UK-based subcontractors for qualifying R&D. From April 2024, overseas subcontractor costs are only claimable where the work must be performed overseas for specific reasons (geography, regulatory requirements, or specialist facility access).
- Software and cloud computing: Licenses and cloud costs directly used in the R&D process.
- Consumables: Materials used or transformed in the R&D work.
General overhead costs — rent, marketing, admin — cannot be claimed. Only costs attributable to qualifying R&D activity are eligible.
How to make a claim
R&D claims are made through your company's corporation tax return (CT600). You file the R&D claim alongside your annual accounts and corporation tax computation. From April 2023, HMRC requires prior notification of intent to claim for companies making their first claim or claiming after a gap of more than three years — you must notify HMRC within six months of the end of the accounting period.
A robust claim requires:
- A technical narrative describing the qualifying project(s): what the scientific or technological uncertainty was, what you did to resolve it, and why the solution was not readily available
- A cost schedule showing qualifying expenditure by category with supporting records
- CT600 with the R&D supplementary pages completed correctly
HMRC has significantly increased compliance activity on R&D claims since 2022 following abuse of the scheme. Claims must be technically robust with proper documentation. Using an R&D specialist or accountant with direct R&D experience is strongly recommended for first-time claims or claims above £10,000.
How much is the benefit?
| Corp tax rate | £10,000 qualifying spend | Effective net benefit |
|---|---|---|
| 19% (small profits rate) | £2,000 credit, taxed at 19% = £380 tax on credit | £1,620 |
| 25% (main rate) | £2,000 credit, taxed at 25% = £500 tax on credit | £1,500 |
On £50,000 of qualifying R&D expenditure, this translates to a net benefit of £7,500–£8,100 depending on your corporation tax rate — a meaningful return on properly documented innovation.
Frequently asked questions
Can a solo director with no employees claim R&D relief?
Yes. There is no minimum company size. A single-director limited company undertaking qualifying R&D work — including software development, technical product creation, or engineering innovation — can claim. Your own director salary costs are claimable in proportion to qualifying R&D time, provided you document how you have allocated your time.
Can I claim for work done by a contractor I hired?
Yes, for UK-based subcontractors: 65% of qualifying payments are claimable. Overseas contractor costs are only claimable from April 2024 in specific circumstances — where the work must be performed overseas due to geography, regulatory requirements, or specialist facility access unavailable in the UK.
How far back can I claim?
R&D claims can be made or amended within two years of the end of the accounting period. If you had qualifying R&D activity in recent years and did not claim, you can amend past returns within this window. For the 2022-23 tax year, the window closes in 2024-25.
Does making an R&D claim trigger an HMRC investigation?
Not automatically. HMRC has increased enquiries since 2022, but this is targeted at high-risk or poorly prepared claims — not at legitimate ones. A technically robust claim with clear narrative and supporting documentation is well-positioned to withstand any enquiry. Poorly documented claims with inflated costs are where the risk lies.
Written by Desh Naidoo-Cann · Founder, Apex Assets Group · MBA Finance
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Important: This article is for general information only and does not constitute tax or legal advice. Tax rules change — always verify with HMRC or a qualified accountant before making decisions. Published 6 May 2026 for 2026-27.