R&D Tax Reliefs
Supporting businesses that are taking commercial risks to advance industry knowledge, products, processes and services.
Tax Status
A limited company within the charge of UK Corporation Tax.
Understanding R&D Tax Relief
R&D tax relief is a UK government incentive that rewards limited companies for investing in innovation. It returns a portion of qualifying R&D costs as a Corporation Tax benefit, encouraging businesses to keep developing new products, services and processes.
Two schemes currently apply, depending on a company’s size and profitability:
Merged R&D Expenditure Credit (RDEC)
20%
Taxable benefit for UK companies with qualifying R&D projects.
Enhanced R&D Intensive Support (ERIS)
27%
Payable tax credit for R&D-intensive loss-making SMEs that spent 30% or more of their total expenditure on R&D, for accounting periods beginning on or after 1 April 2024.
R&D Tax Relief Eligibility
Eligible Companies
To be eligible for R&D tax relief, the claimant company is:
Sector
In the manufacturing, engineering, technology, software or life science sectors (although most claims come from these sectors, eligibility depends on the activity carried out, not the industry, so that other sectors can qualify too).
Resource Commitment
Has committed time and financial resources into a qualifying R&D project.
Eligible Projects
The R&D project must also meet the following criteria:
Sought an Advance in Science or Technology by
- Attempting to create a new process, material, device, product or service.
- Or attempting to appreciably improve an existing process, material, device, product or service.
Uncertainty
Faced scientific or technological uncertainty that a competent professional in the field could not readily resolve at the outset, and involved research, testing and analysis to attempt to resolve it.
Advance Knowledge
Advanced knowledge or capability in the field as a whole, not just the company – even if the project failed
Qualifying R&D Activities
R&D tax reliefs support innovation projects from the start of a project through to the resolution of its scientific or technological uncertainty. Below is an example of where, in a product’s life-cycle, qualifying R&D activity can occur.
Non-Qualifying
Commercial/Scientific Idea
Market/Feasibility Research
Qualifying R&D
Establishing technological or scientific uncertainty
The process of resolving the technological or scientific uncertainty
Prototyping
Non-Qualifying
Patents or other IP protection sought
Pre-production design
Industrial upscaling
Qualifying R&D Costs
There are five pillars of qualifying R&D costs you can claim for within the “uncertainty” phase of an innovation project.
Staff & EPW Costs
Under the R&D tax relief incentive, you can claim the following costs for staff or externally paid workers (EPWs) who were directly involved in an R&D project (they had “hands-on” input) and some managerial time:
Salaries
Wages
National Insurance Contributions
Pension Contributions
Software, Data & Cloud Computing Costs
Software expenditure that was directly involved in the R&D project. You can also claim for a proportion of software that was only partly used in innovation activities.
For accounting periods beginning on or after 1 April 2023, you will be able to claim for Data & Cloud Computing Costs directly involved with the R&D project that fall into the following categories:
Data storage
Hardware facilities
Operating systems
Software platforms
Purchase costs of data sets
Consumable Costs
Materials and hardware that are directly consumed during the R&D project.
This includes chemicals, ingredients and electrical components.
These materials and their outputs must not be commercially viable.
Utility Costs
Power, water and fuel that are directly used in an R&D project.
Calculating the proportion of utility costs used in an R&D project can be difficult, but the Amplifi team can advise you on the best practices.
Subcontractor Costs & Overseas Restrictions
Whichever party decides to undertake the R&D can claim the relief. You can claim 65% of an R&D payment made to an unconnected contractor, or up to 100% for a connected contractor..
Overseas Restrictions – From accounting periods beginning on or after 1 April 2024, all claimants’ (except NI-registered companies claiming ERIS) contracted R&D activities must now be undertaken in the UK, plus the company or staff controller of any R&D-related EPWs is required to apply PAYE and NICs for that worker.
R&D Tax Relief FAQs
Pre-Claim Notification
Businesses making R&D tax relief claims for expenditure during accounting periods beginning on or after 1 April 2023 must now notify HMRC in advance of their intention to submit a claim.
Who Does It Affect?
- First-time claimants
- If a business has not submitted a claim within the last 3 years (The 3 years can be calculated by taking 6 months from the end of the accounting period and counting back 3 years).
Requirements of the Pre-Claim Notification
The claim notification form can be completed by either a company representative or an agent acting on the company’s behalf and will require:
- Unique Taxpayer Reference
- Name and contact details of the senior internal R&D contact within the company
- Accounting period start and end date that is being claimed for
- Period of account start and end date
- Summary of the high-level planned activities
- Details of any agent involved in the R&D claim
Timeline to Submit The Pre-Claim Notification
The advance notification must be submitted within 6 months of the end of the accounting period for which the claim is being made.
Additional Information Form (AIF)
The R&D tax relief additional information form is a required document that businesses must submit to HMRC to support their claims for Research and Development (R&D) tax relief or expenditure credit. This form provides detailed information about the R&D activities, associated costs and supporting evidence for each accounting period.
Mandatory Submission
Introduced as a mandatory process for claims made on or after 8 August 2023, the Additional Information Form (AIF) must be submitted for each accounting period before or on the same day as your Company Tax Return. Without it, your claim will be invalid.
What Details Are Required
- Company details, including the UTR, PAYE, VAT number and SIC code
- Name and contact details of the senior internal R&D contact within the company
- Accounting period start and end date that is being claimed for
- Details of any agent involved with the R&D claim
- Qualifying direct and indirect expenditure details by cost category
- Details of projects being claimed for and total qualifying expenditure per project
- Loss-making R&D intensive SMEs need to include total relevant expenditure details
Who Can Submit An AIF
The claimant or an agent acting on behalf of the company can complete and submit the AIF.
Financials - What is required
To perform an in-depth analysis of a project’s relevant R&D expenditure (i.e. staff & EPW, subcontractors, consumables, utilities, software, data & cloud computing costs) and create a report with a full audit trail, our R&D specialists will analyse the following financial documentation:
- Payroll
- Nominal ledger transactions
- Grant information
- Copy of the statutory accounts
- Copy CT600
- Copy of Tax Computation
Grants - How they affect an R&D tax relief claim
You can claim both grants and R&D tax reliefs, however, numerous factors determine what you can and cannot claim, so it’s best to consult an expert who can assess your specific innovation and its unique circumstances.
Technical Narrative - What we include
To tackle abuse and fraudulent R&D tax relief claims, the government has introduced a new cross-cutting team and is requiring more detailed claims.
Therefore, the technical narrative must fully justify the expenditure outlined in the financial report.
Our industry-experienced technical writers will interview the competent professional and other key members of the R&D team and produce a comprehensive technical narrative, which will include key information such as:
- Background of the company
- Project aim/context
- Competent professional and key people who worked on the project
- Advancement being sought
- Scientific and technological uncertainties
- How they attempted to resolve them
Accountant - Their role
In our process, the accountant is only required to:
- Possibly, share relevant financial information with our team.
- Submit the completed claim to the HMRC and make the necessary CT600 amendments (all the information for these steps will be provided by Amplifi).
How to claim
We recommend working with a specialist R&D tax relief provider (like Amplifi Solutions) to complete an R&D tax relief claim.
Our experienced team of qualified accountants, chartered tax advisors, client account managers, and industry-experienced technical assessors will compile a comprehensive claim and support it in the event of an HMRC enquiry.
Benefit - When the benefit should be received
Offsets will be taken off the tax bill when it is due.
Cash payments are estimated at 40 – 60 days, but this does depend on the HMRC workload.
Enquiry - Why HMRC would open a claim enquiry
The R&D tax relief incentive is currently undergoing a number of reforms, one of which is improving compliance and tackling abuse (£469 Million was lost in 2020/21 alone to fraudulent claims and error).
Subsequently, a number of new measures have been introduced, including adding 100 more compliance team members and requesting more details in claims, but it has also resulted in a rise in enquiries.
Some of the main reasons a R&D tax relief claim may undergo an enquiry include:
- Limited evidence to support the baseline
- No supporting information
- Disparities in the financial information or technical narrative
- Lack of qualifying proof
- Random selection
To help project your claim, work with an R&D tax relief adviser, like Amplifi.
We perform in-depth financial analysis of your R&D expenditure, create educated technical narratives that justify your spend and we will support you during any HMRC audit.
Why Choose Amplifi?
Over a Decade of Experience
We’ve been supporting innovative businesses across the UK with the R&D tax relief schemes for more than 10 years.
Specialist Expertise
Our team consists of qualified accountants, chartered tax advisers and technical consultants who have real-world expertise in sectors ranging from engineering and software to life sciences.
Comprehensive and Diligent Service
From assessment to robust documentation and enquiry support (if required) every stage is delivered with accuracy, integrity and the highest professional standards.