Business Owners · Reliefs and incentives
R&D tax credits for UK companies under the merged scheme
How the merged R&D expenditure credit and ERIS work for accounting periods from 1 April 2024, and how to claim without inviting an HMRC enquiry.
On this page12 sections
Key points
- 1One merged scheme applies for accounting periods beginning on or after 1 April 2024
- 2Many first-time claims need a claim notification within six months of the period end
- 3A claim without the additional information form is invalid
- 4Good records at the time are what make a claim safe
If your company is trying to solve technical problems that nobody has solved for you, there may be money back in the tax system. R&D tax relief rewards that work, but the rules changed from 1 April 2024 and the claims process is now stricter. We help owner-managed companies claim what they are entitled to, with evidence that stands up, and we say so honestly when a project does not qualify.
For the current rates, forms and deadlines, always check GOV.UK's R&D tax relief guidance. This page explains the picture; your own claim depends on your facts.
Who this is for
R&D relief is for companies that carry out qualifying research and development, whether or not they make a profit. It suits software and technology businesses, engineering and manufacturing firms, food and materials developers, and any company that builds new processes or products where the outcome was genuinely uncertain.
It is not just for laboratories. A construction technology firm, a fintech start-up and a manufacturer improving a production line may all have qualifying work. The test is about the problem being solved, not the industry.
What counts as R&D for tax
HMRC's test is stricter than the everyday meaning of research. A project qualifies if it seeks an advance in science or technology, not just an advance for your company, and it does so by resolving scientific or technological uncertainty. That means uncertainty a competent professional working in the field could not readily resolve using what is already known.
Examples that often qualify include developing a new material or process, building software that solves an unresolved technical problem, and creating a prototype where the performance could not be predicted. Examples that often do not qualify include applying an existing technique to a new customer, routine bug fixing, cosmetic design changes and projects where the only doubt was commercial.
It helps to describe each project in three parts: the technical goal, the specific uncertainties and how you tried to resolve them. If you cannot describe the uncertainty without using commercial language, the project may not qualify.
Which costs count
Staff time, externally provided workers, subcontractors, consumable materials, software, and data and cloud computing costs can all form part of a claim, provided they relate directly to qualifying activity. Payments to unconnected staff providers and subcontractors are normally claimed at 65%. Capital spending, land, patents and trade marks, and rent are not claimable.
Since accounting periods beginning on or after 1 April 2024, a subcontractor's costs only count where your company decided on and planned the R&D, and work done overseas is generally excluded. Where the cost has been paid matters too: the money must have been paid before the claim is made.
How the merged scheme works
For accounting periods beginning on or after 1 April 2024, there is one main scheme. You claim a credit of 20% of your qualifying R&D expenditure. The credit is treated as taxable income, so the real benefit is less than 20p in the pound.
The credit is then used in a set order. It first reduces your corporation tax bill. A notional tax deduction follows, at a lower rate for loss-making and small-profit companies. A cap tied to your payroll liabilities comes next. Anything left can then settle other amounts you owe HMRC and, if you meet the conditions, be paid to you in cash. The conditions include being a going concern and having PAYE and VAT up to date.
ERIS for loss-making, R&D-intensive companies
Enhanced R&D Intensive Support, or ERIS, is for loss-making small and medium-sized companies. To qualify, at least 30% of the company's total expenditure, across the company and its connected companies, must be on qualifying R&D. You deduct 186% of your qualifying costs, and surrender the resulting loss for a payable credit of 14.5%.
That can be worth up to about 27p for every £1 of qualifying spend. The same payroll cap applies, and under ERIS a claim over the cap is invalid, not merely carried forward. A company that has claimed under ERIS before can sometimes stay eligible through a dip in intensity, so past claims matter.
The claims process
Three steps now come before the money. First, a claim notification: if you have not claimed in the previous three years, you must notify HMRC online within six months of the end of the period of account. Second, an additional information form, which must be filed on or before the claim and is required each time you claim. Third, the claim itself in your Company Tax Return, with confirmation that both steps were done.
Get one wrong and the claim can be invalid. Most are easy to meet on time and painful to fix late, so we start the process before the year end where we can.
Advance assurance
Smaller companies can ask HMRC for advance assurance on an R&D claim. A targeted service, currently a pilot running until May 2027, covers specific complex or high-risk areas of a claim. A full-claim service is for first-time claimants and covers the first three accounting periods. It is optional and is not itself a claim, so you still claim through your tax return. Whether it is worth the wait depends on your deadlines, which we review with you.
Common mistakes
- Treating routine work as R&D. Making something new to you is not the same as resolving a technical uncertainty.
- Weak evidence. Records written after the event rarely persuade HMRC.
- Overstating staff time. Time claimed must match the work done, and the people must be on your payroll or properly engaged.
- Missing the notification. A first-time claimant who reaches the return deadline without notifying can lose the claim.
- Overseas and subcontractor spend. Rules for outside work and work abroad were tightened for periods from 1 April 2024.
- Ignoring group links. Connected companies change the intensity test and the cost limits.
How we help
We review your projects with the people who actually did the work, and decide which qualify and which do not. We then prepare the claim notification, the additional information form and the computation, and check the claim for the points HMRC tends to raise. Where useful, we consider whether advance assurance suits your timetable.
We also look at the wider picture. How a group is set up affects R&D claims, and R&D sits naturally beside the Patent Box and EIS and SEIS when you are building and funding a technology business. If HMRC asks questions, we deal with them on your behalf. See HMRC Enquiries.
Why ASWATAX
You work directly with Omar Aswat, a Chartered Tax Adviser, not a claims processor. Our advice is commercial: we tell you what a claim is likely to be worth after tax, whether the effort is justified, and how to keep it safe. We would rather lose a doubtful claim at the start than defend it later.
Talk to us
Not sure if your projects count, or whether you need to notify HMRC before a deadline? Book a free first call. We reply the same working day.
01 · Guide in progress
The R&D Tax Credits Guide
A plain-English guide to what qualifies, how the merged scheme and ERIS pay out, and how to prepare a claim that stands up.
Talk it through instead
Our The R&D Tax Credits Guide is being written. In the meantime, a 20-minute call with a Chartered Tax Adviser is free.
Book a free callWe reply the same working day.
Often handled together.
- ServicePatent BoxHow the Patent Box gives a 10% corporation tax rate on profits from patented inventions, who can claim it, and how it sits alongside R&D relief.Read the page
- ServiceEIS/SEISHow EIS and SEIS help early-stage companies raise money and give investors tax relief, with the limits that apply from 6 April 2026.Read the page
- ServiceHMRC EnquiriesHelp for companies and directors facing an HMRC enquiry or compliance check, with a Chartered Tax Adviser dealing with HMRC for you.Read the page
- ServiceThe Business LifecycleA stage-by-stage map of the tax decisions a business owner faces, from start-up structure to exit and succession, with links to the service for each.Read the page
From the journal.
Questions, answered.
Straight answers to what clients ask us most. Your own situation may differ, so treat them as a starting point.
Q1What is the merged R&D scheme?
It is the single R&D relief that replaced the old SME scheme and the old large-company credit for accounting periods beginning on or after 1 April 2024. Qualifying companies claim a taxable credit of 20% of their qualifying R&D spend, known as the R&D expenditure credit or RDEC. A separate route, Enhanced R&D Intensive Support, or ERIS, exists for loss-making companies that are heavily R&D-focused.
Q2How much is the R&D expenditure credit worth?
The credit is 20% of qualifying expenditure, but it counts as taxable income, so the net benefit is lower. At the 25% main rate of corporation tax, for example, £100,000 of qualifying spend gives a £20,000 credit and about £15,000 after tax. How the credit is paid out also depends on your corporation tax bill, your PAYE and National Insurance and any other amounts owed to HMRC.
Q3What is ERIS and who can use it?
ERIS is a route for loss-making small and medium-sized companies whose R&D spending is at least 30% of their total expenditure. It gives an extra 86% deduction on qualifying costs, so 186% in total, and a payable credit of 14.5% of the surrendered loss. In broad terms that is worth up to about 27p for each £1 of qualifying spend, subject to a cap.
Q4Does my project count as R&D for tax purposes?
Tax R&D is narrower than most people expect. The project must seek an advance in science or technology by resolving uncertainty that a competent professional in the field could not easily resolve. Routine development, cosmetic changes and commercial or market uncertainty do not count. We test your projects against HMRC's published guidelines before any money is claimed, and tell you plainly if they fall short.
Q5What costs can I claim?
Qualifying costs include staff time spent on R&D, externally provided workers, subcontractors, consumable materials, software, and data and cloud computing costs. You cannot claim capital expenditure, land, patents and trade marks, or rent. Payments to unconnected subcontractors and staff providers are limited to 65%. Costs for R&D carried out overseas are restricted from 1 April 2024, so location needs checking early.
Q6What is a claim notification and do I need one?
A claim notification is a short online form telling HMRC you intend to claim. You must send it unless you have already made an R&D claim in the three years before the end of the notification window. The window runs from the start of your period of account until six months after it ends. Miss it without an exception and the claim is invalid.
Q7What is the additional information form?
It is an online form that must be submitted for every R&D claim, on or before the day the claim is made. It asks for details of your projects, the advance sought, the uncertainty resolved, and a breakdown of costs. A claim made without it is invalid, and vague answers raise the chance of an enquiry. We prepare it from your project evidence, not from a template.
Q8How long do I have to make a claim?
Where your period of account is 18 months or less, the deadline is 24 months from its last day. A claim covering a period longer than 12 months needs a separate claim for each accounting period. The six-month claim notification deadline can fall much earlier, so a first-time claimant should not wait until the return is nearly due before starting.
Q9Can I claim for earlier years under the old SME scheme?
Only for periods still within the time limit, and the old rules apply to periods beginning before 1 April 2024. Those older claims follow the SME and large-company schemes, with different rates. We can review what is still open, and also check whether a past claim was calculated correctly, since errors have to be corrected with HMRC.
Q10Is there a cap on the cash I can receive?
Yes. The payable amount is capped at £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities for the period. Under the merged scheme any excess carries forward, while under ERIS a claim above the cap is invalid. Companies that create and manage their intellectual property mainly through employees may be outside the cap, if connected-party spend stays within the limit.
Q11Can I get HMRC to confirm my claim in advance?
Smaller companies can apply for R&D advance assurance. A targeted service, running as a pilot until May 2027, covers specific high-risk areas of a claim. A full-claim service is for first-time claimants and gives assurance on the first three accounting periods. It is voluntary, it is not itself a claim, and it takes time, so we weigh it against your deadlines.
Q12What records should I keep for an R&D claim?
Keep technical notes, test results, design iterations, failed attempts, meeting notes and staff timesheets or time estimates, all dated at the time. HMRC wants to see what was uncertain at the start and how it was resolved. Evidence written months later, to justify a claim, is far weaker. A simple monthly habit protects you better than a polished report prepared after the year end.
Q13Will claiming R&D relief trigger an HMRC enquiry?
A claim does not mean an enquiry, but R&D is an area HMRC reviews closely, and weak or generic claims are the ones it questions. Strong project descriptions, consistent figures and a correct additional information form lower the risk. If a query arrives, we respond for you and, where needed, support you through the process described on our HMRC Enquiries page.
Q14Can a company in a group claim?
Yes, but group claims need care. Intensity for ERIS is measured across the claimant and all connected companies, and spend with connected parties or on externally provided workers is restricted in several ways. Which company employs the people, owns the intellectual property and bears the cost can change the result. We map the structure before the claim, not after.
Q15How does R&D relief interact with the Patent Box and EIS?
They are separate reliefs that can work together. R&D relief reduces the cost of developing the technology, the Patent Box can reduce tax on profits from patented inventions, and EIS or SEIS can help raise the funding. Some of the rules touch, for example on subsidised funding, so we plan the three together when a company is investing and raising money.
05 · Next step
Talk it through with Omar.
The first call is free. You'll speak to a Chartered Tax Adviser, and leave with a clear view of your options.
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