WHAT IS R&D TAX RELIEF?

R&D Tax Relief is a UK government incentive designed to support companies undertaking genuine research and development by reducing Corporation Tax or providing a payable credit where eligibility criteria are met. Eligible companies can receive significant financial benefit that can be reinvested in innovation, hiring, capital expenditure, or growth.

R&D Relief has undergone significant reform recently, including the introduction of a single merged scheme from 1 April 2024 and changes to rates and qualifying criteria. Despite increased compliance activity, it remains one of the most valuable innovation incentives for UK businesses.

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How R&D Tax Relief Works

To qualify for R&D Tax Relief, a company must:

  • Be a UK limited company subject to Corporation Tax.
  • Have undertaken qualifying R&D activity during the accounting period.
  • Have incurred qualifying expenditure on those activities.

If eligible, the company’s qualifying expenditure generates additional tax relief, either by reducing its tax bill or by generating a repayable credit if the company is loss-making.

R&D claims must be prepared and evidenced in line with DSIT’s Guidelines on the meaning of R&D for tax purposes and HMRC’s Guidelines for Compliance. This ensures claims are defensible and aligned with current statutory expectations.

What Counts As R&D

R&D for tax purposes occurs when a company is attempting to achieve an advance in science or technology by addressing scientific or technological uncertainty. That is, problems that competent professionals cannot readily resolve using existing knowledge.

Typical qualifying activities include:

Innovating Through R&D

Creating or improving products, processes, or services with technological uncertainty.

Overcoming Technical Challenges

Resolving engineering, software, or scientific challenges through iterative development.

Structured Research & Testing

Systematic investigation and experimentation to overcome unknowns.

Importantly, R&D need not be successful to qualify. Activity that seeks to resolve uncertainty is eligible even if the outcome is inconclusive.

R&D Tax Credit rates

R&D tax credits are calculated based on your R&D spend in relation to your qualifying activity. Depending on what incentive you’re claiming under, the rates of relief can vary as shown in the table below.
Company type SME R&D tax incentive RDEC Merged scheme Enhanced R&D intensive support
Before 1 April 2023 After 1 April 2023 Before 1 April 2023 From 1 April 2023 From 1 April 2024 From 1 April 2024
Loss-making SME Up to 33.35% Up to 18.6% 10.5% 15% 16.2%
Profit-making SME Up to 24.7% Up to 21.5% 10.5% Up to 16.2% Up to 16.2%
R&D intensive SME Up to 27% Up to 27%
Large company 10.5% Up to 16.2% Up to 16.2%

Example Projects

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A biomedical engineering company aims to create a new bio-active stent. Initially, the team reviews existing designs, identifying a technological uncertainty: achieving an ultra-thin, structurally sound stent with effective drug delivery. This uncertainty requires a technological advance beyond current knowledge, making it qualifying R&D for tax purposes.

Qualifying R&D starts once the team actively works to resolve this uncertainty. They test materials and conduct further reviews to inform their novel design. Activities such as planning, modeling, and prototype development directly contribute to overcoming the technological challenges, so these are eligible for tax relief. Indirect activities, like feasibility studies and reporting, also qualify if they support the project as listed under DSIT guidelines.

However, non-qualifying activities include tasks not aimed at resolving the identified uncertainty, like funding acquisition and general marketing planning. Likewise, regulatory testing and routine manufacturing do not qualify, as they do not seek to advance science or technology. Expenditures for eligible activities directly linked to resolving the technological uncertainty can be included for tax relief

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A furniture company is designing a piece of collapsible furniture. While most of the design work is routine, space, cost, and material constraints prevent using a standard fitting in one part. With no practical alternative available, the company starts work to develop a suitable fitting, facing a technological uncertainty not solvable by existing knowledge or their experienced team.

This specific sub-project qualifies as R&D due to the technological challenge, though the rest of the design work remains routine and non-qualifying.

Further examples of qualifying projects from other sectors can be found in the Insights section of our website.

Qualifying Costs

Once a project has been identified as qualifying for the relief there are a number of qualifying cost categories we can look at:

Staff Costs

Salary, Employer’s NIC, Employers Pension contributions & Reimbursed Travel expenses.

Externally Provided Workers (EPWs)

Workers that are supervised directly by a staff member but are employed through an agency and thus not on company payroll.

Software License Costs

Software used in activity that constitutes R&D for tax purposes.

Subcontractor Costs

Payments to subcontractors to undertake R&D on behalf of the company.

Consumable Costs

Consumable items, consumed or transformed in activity that constitutes R&D for tax purposes including water, fuel & power of any kind.

Do I need to renew my license?

Payments made to the subject of the trial in return for participating in the trial.

How much can your business claim?

The benefit you receive depends on the R&D scheme applicable to your accounting period and company profile (SME, large, or R&D-intensive SME). For accounting periods beginning on or after 1 April 2024, the merged scheme generally applies, with exceptions for R&D-intensive loss-making SMEs.

How Asquith Bhondi Supports You

Claiming R&D Tax Relief requires more than identifying innovative work. Claims must be technically robust, clearly evidenced, and aligned with current compliance expectations. This is where Asquith Bhondi provides end-to-end support.

Our Role in the Claim Process

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We work directly with your technical and finance teams to assess eligibility, identify qualifying projects, and determine the relevant fields of science or technology. Our analysis focuses on genuine scientific or technological uncertainty and excludes non-qualifying activity at an early stage to reduce risk.
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We prepare a clear, structured technical narrative explaining the advance sought, the uncertainties faced, and the work undertaken to resolve them. All claims are supported by proportionate evidence and prepared in line with DSIT guidance and HM Revenue & Customs compliance standards.

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We coordinate the R&D submission alongside your CT600, ensuring consistency between the technical narrative and the financial analysis. Where HMRC raises queries, we manage the enquiry process, responding to information requests and technical challenges in a professional, evidence-led manner.

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Depending on your company’s position, relief is realised as a Corporation Tax reduction or a payable credit. We ensure calculations reflect the correct scheme, rates, and caps applicable to your accounting period.

Compliance You Can Rely On

HMRC scrutiny of R&D claims has increased significantly in response to historic error and misuse across the market. This makes technical accuracy, clear evidence, and realistic positioning essential.

Asquith Bhondi’s compliance-led approach is designed to reduce enquiry risk and protect clients over the long term. We are direct where work does not qualify and prioritise defensibility over short-term gain.

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