The Ultimate R&D Tax Credit Guide
Everything UK businesses need to know about claiming R&D tax relief
Download PDF VersionChapter 1: The Basics
What are R&D tax credits?
R&D tax credits are a UK government tax relief designed to encourage companies to invest in research and development. Companies can reduce their tax bill or claim cash credits worth up to 33% of their R&D expenditure.
SME vs RDEC scheme
SME Scheme
- • Companies with <500 employees
- • Turnover <€100m or balance sheet <€86m
- • Up to 230% deduction or 33% cash credit
- • More generous relief
RDEC Scheme
- • Large companies or grant-funded SMEs
- • Any size company
- • 13% credit on qualifying costs
- • Less generous but still valuable
How much can you claim?
SME Example:
£100,000 R&D spend → Up to £33,000 cash credit or £24,700 tax saving
RDEC Example:
£100,000 R&D spend → £13,000 credit (less tax)
Chapter 2: What Qualifies
HMRC's definition decoded
R&D for tax purposes means seeking an advance in science or technology through the resolution of scientific or technological uncertainty.
✓ What Qualifies
- • Developing new products, processes or services
- • Making appreciable improvements to existing ones
- • Using science or technology to overcome uncertainty
- • Creating new software or algorithms
- • Failed projects (still qualify!)
✗ What Doesn't
- • Routine analysis or testing
- • Market research
- • Cosmetic or aesthetic improvements
- • Social science research
- • Simple adaptation of existing tech
Real-world examples by sector
Software:
Building custom APIs, optimizing algorithms, developing AI/ML solutions
Manufacturing:
New production methods, material testing, automation systems
Food & Beverage:
New recipes, extending shelf life, sustainable packaging
Chapter 3: The Claims Process
Step-by-step walkthrough
- 1
Identify qualifying activities
Review your projects against HMRC criteria
- 2
Calculate eligible costs
Staff costs, subcontractors, materials, software
- 3
Prepare technical narrative
Document the uncertainties and advances
- 4
Submit claim
Via CT600 or standalone claim
Timelines and deadlines
⏰ Important deadlines:
- • Corporation tax return: 12 months after accounting period
- • Standalone claims: 2 years after accounting period
- • Amendments: 12 months after filing deadline
Chapter 4: Maximizing Your Claim
Often-missed expenses
Direct costs often missed:
- • Employer pension contributions
- • Employer NICs
- • Technical director time
- • Prototype materials
- • Cloud computing costs
Indirect costs to consider:
- • Heat, light, and power
- • Relevant software licenses
- • Technical training costs
- • Patent filing costs
- • Testing equipment
💡 Pro tip:
Failed projects often have the highest claim values because they involve the most uncertainty and experimentation.
Chapter 5: HMRC Compliance
What HMRC looks for
- ✓Clear technical narrative: Explaining the uncertainties and how you tried to resolve them
- ✓Competent professionals: Evidence that qualified people worked on the R&D
- ✓Contemporaneous evidence: Project plans, emails, technical notes from the time
- ✓Accurate cost calculations: Clear methodology for apportioning costs
How to support your claim
Essential documentation:
- • Project timelines and milestones
- • Technical challenges faced
- • Failed approaches and learnings
- • Staff time records
- • Invoices for materials and subcontractors
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