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Yes, your company may be able to claim UK R&D tax relief, but eligibility is decided through separate checks. First identify when the accounting period began, because periods starting on or after 1 April 2024 use the merged R&D expenditure credit (RDEC) and the enhanced R&D intensive support (ERIS), while earlier periods follow the previous scheme framework. Then establish that the project meets HMRC’s tax definition of R&D, that the company qualifies for the relevant route, and that each cost satisfies the detailed rules.
For post-1 April 2024 periods, merged RDEC is generally available to trading companies chargeable to Corporation Tax and has a 20% headline credit rate. The credit is taxable and subject to a PAYE and National Insurance cap. ERIS is narrower: it is for loss-making, R&D-intensive SMEs that meet a 30% intensity test and other conditions. It provides an additional 86% deduction, producing 186% total expenditure, and a payable credit of up to 14.5% of eligible surrenderable loss. You cannot claim both routes on the same expenditure.
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Start with the accounting-period start date
The first question is not whether the business calls its work “innovation”. It is which rules apply to the accounting period containing the expenditure. The merged RDEC and ERIS apply to accounting periods beginning on or after 1 April 2024. Earlier periods use the former RDEC and SME relief framework, with different calculations and conditions.
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Do not combine rates from different periods. A company with a year ending after 1 April 2024 may still be in an accounting period that began before that date, so the start date—not the year-end alone—controls the transition. If the period of account is longer than 12 months, HMRC requires a separate claim for each accounting period within it.
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Transition checklist
- Write down the first day and last day of the accounting period.
- Determine whether the first day is on or after 1 April 2024.
- Keep expenditure, project records and calculations separated by accounting period.
- Use the rules and rates for that period only; do not apply the 20%, 86% or 14.5% figures to an earlier period without checking its legislation.
The three eligibility gates
A successful claim normally passes three separate gates. A qualifying project does not make every related invoice eligible, and being an SME does not automatically qualify a company for ERIS.
Gate 1: Is the project R&D for tax purposes?
HMRC’s definition asks whether the project seeks an advance in overall knowledge or capability in a field of science or technology, and whether it addresses scientific or technological uncertainty that a competent professional could not readily resolve. The assessment is project-specific. Explain what was already known, the advance sought, the uncertainties encountered and the work undertaken to resolve them.
HMRC provides an R&D assessment tool to help businesses understand the criteria and prepare information. It is guidance based on the facts supplied, not blanket approval of every project cost. Save the questions, answers and technical evidence used. A project can qualify while a particular expense does not.
Gate 2: Does the company fit the scheme?
Merged RDEC: the route is generally for a trading company chargeable to Corporation Tax that has a qualifying R&D project.
ERIS: the company must be a loss-making SME carrying out R&D and must satisfy the R&D-intensity condition. HMRC describes relevant R&D expenditure as needing to be at least 30% of total expenditure, including connected companies, subject to detailed rules and alternative-period provisions. Confirm the calculation rather than relying on headcount or the label “SME”.
An ERIS-eligible company may choose merged RDEC, but it cannot claim both schemes for the same expenditure. The better route depends on the company’s taxable result, losses, PAYE and National Insurance liabilities, connected-company position and cash-flow needs.
Gate 3: Does each item of expenditure qualify?
Test every category against its connection to the qualifying R&D, the relevant accounting period, payment status, location, contractor relationship and any connected-party rules. The schemes are broadly aligned on costs, but exceptions—including special Northern Ireland provisions—mean that a spreadsheet category alone is not enough.
Which costs can qualify?
HMRC’s categories are areas to investigate, not automatic entitlements. Allocate only the proportion that relates to qualifying R&D and retain a method that another person can reproduce.
Staff costs
Potentially qualifying staff costs include salary and wages, bonuses, employer pension contributions, secondary Class 1 National Insurance contributions and relevant staff training. The work must relate to the qualifying R&D. For an employee who spends 40% of working time on the project, the claim should be based on an evidenced R&D proportion rather than the entire employment cost.
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Maintain payroll reports, employment records, time-allocation evidence and a description of each person’s technical role. HMRC’s payment condition also matters: staff amounts left unpaid more than nine months after the balance-sheet date have a special timing rule in the internal guidance.
Externally provided workers
Payments for externally provided workers may qualify where the workers perform qualifying R&D and the detailed contractual and payment conditions are met. Check who employs the worker, who directs the work, whether the supplier is connected and whether the activity is performed within permitted territory.
Consumables
Consumables used or transformed in the R&D process can qualify. Examples may include materials, utilities or other items consumed in laboratory, engineering or testing work. Production and distribution of ordinary goods and services are excluded, so separate routine manufacturing from experimental activity.
Software, data licences and cloud computing
Software used for qualifying R&D can be eligible under the relevant conditions. For periods beginning on or after 1 April 2023, qualifying expenditure can also include data-licence and cloud-computing costs. Cloud examples include storage, hardware facilities, operating systems and software platforms.
Apportion shared subscriptions and infrastructure to the qualifying R&D use. A general-purpose service used by sales, administration and R&D should not automatically be claimed in full.
Contracted-out R&D
Contracted-out work needs particular care. HMRC’s current guidance says only the company that decides that R&D needs to be carried out can claim for that contracted R&D. The company should be able to evidence the decision, planning and oversight. A supplier’s description of its own “R&D” does not transfer the right to claim.
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For an unconnected contractor, HMRC guidance describes a 65% limit on the contractor payment. For connected parties, the allowable amount uses the lower of the payment and the relevant contractor costs. Overseas activity is restricted, subject to exceptions, so identify where the work physically occurred and review the applicable rule before including it.
Clinical-trial volunteer payments
Payments to clinical-trial volunteers can fall within the qualifying categories where the statutory conditions are met. Keep trial protocols, payment records and the link to the scientific or technological uncertainty.
Costs that normally cannot be claimed
HMRC examples of excluded costs include:
- Capital expenditure.
- Land.
- Patents and trademarks.
- Rent and rates.
- Leasing costs.
- Production and distribution of goods and services.
General overheads and project-adjacent spending are not automatically eligible. A cost must fall within a permitted category and be incurred for qualifying R&D under the rules for the period. Capital assets may support experimentation without becoming qualifying revenue expenditure.
Payment, location and connected-party checks
Under merged RDEC and ERIS, HMRC’s internal manual states that expenditure is subject to a payment condition: the amount must have been paid before the claim is made. Review unpaid supplier invoices and accruals before submitting. Apply the separate timing rule for staff costs that remain unpaid more than nine months after the balance-sheet date.
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- Whether the party is connected to the claimant.
- Where the work was carried out.
- Who made the decision that the R&D should be undertaken.
- What the contract requires and who controls the technical work.
- What was invoiced, what was paid and when.
These facts affect eligibility, the 65% unconnected-contractor limit, the connected-party calculation and overseas restrictions.
How merged RDEC works
For a post-1 April 2024 period, HMRC’s public calculation guide says to total qualifying costs and multiply them by 20% for the headline expenditure credit.
| Item | Merged RDEC treatment |
|---|---|
| Typical claimant | Trading company chargeable to Corporation Tax with a qualifying R&D project |
| Headline rate | 20% of qualifying expenditure |
| Tax treatment | The credit is taxable |
| PAYE/National Insurance cap | Generally £20,000 plus 300% of relevant PAYE and National Insurance liabilities, subject to exceptions |
| Route choice | An ERIS-eligible company may choose RDEC, but the same expenditure cannot be claimed under both |
The 20% figure is a headline credit rate, not a promise of a 20% net cash refund. Taxability, the PAYE cap, the company’s Corporation Tax position and the statutory payment and processing rules affect the result.
Illustrative calculation
If qualifying expenditure is £100,000, the headline credit calculation is £100,000 × 20% = £20,000. That figure remains subject to the tax and cap rules; it should not be described as the final cash amount without the company’s full facts.
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ERIS is designed for loss-making, R&D-intensive SMEs. The intensity test generally requires relevant R&D expenditure to be at least 30% of total expenditure, including connected companies, with detailed rules and alternative-period provisions.
| Item | ERIS treatment |
|---|---|
| Company status | Loss-making SME meeting the R&D-intensity and other conditions |
| Additional deduction | 86% of qualifying expenditure |
| Total deduction | 186% when the underlying 100% deduction is included |
| Payable credit | Up to 14.5% of eligible surrenderable loss |
| Loss surrendered | Limited by the lower of enhanced expenditure and the relevant trading loss |
The payable credit is not calculated simply by multiplying all project costs by 14.5%. First calculate the enhanced expenditure, identify the relevant trading loss, apply the lower-of limitation and then apply the cap and other conditions.
Illustrative ERIS calculation
Suppose qualifying expenditure is £100,000. The additional 86% deduction is £86,000, added to the underlying £100,000 deduction to produce £186,000 enhanced expenditure. If the relevant trading loss available for surrender is £150,000, the surrenderable amount is constrained by the lower figure, £150,000, before the 14.5% rate and any cap or other condition are applied.
HMRC’s calculation guidance also describes a 10% credit on surrenderable loss for a loss-making SME that fails the ERIS intensity condition under a relevant legacy SME calculation section. Check the accounting period before using that figure; it is not the standard ERIS rate for periods beginning on or after 1 April 2024.
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Do not select a scheme from the headline percentage alone. Compare the following facts for the same accounting period:
| Decision point | Why it matters |
|---|---|
| Accounting-period start date | Determines whether merged RDEC and ERIS apply or the earlier framework applies |
| Company status | ERIS requires a loss-making SME; merged RDEC is generally for trading companies chargeable to Corporation Tax |
| R&D intensity | ERIS generally requires at least 30% relevant R&D expenditure, including connected companies |
| Calculation form | RDEC gives a taxable credit; ERIS gives an enhanced deduction and potentially a surrenderable-loss credit |
| PAYE and National Insurance | RDEC is generally subject to the £20,000 plus 300% cap, subject to exceptions |
| Loss position | ERIS credit depends on the relevant trading loss and the lower-of surrender limitation |
| Contractors and overseas work | Restrictions and exceptions can change the qualifying cost total under either route |
| Notification and filing history | Prior claims and whether notification is required affect the filing sequence |
Only the company’s own figures can determine which permitted route produces the appropriate result. An ERIS-eligible company may elect merged RDEC, but cannot use both on identical expenditure.
How to claim: a complete process
1. Map the accounting period
- Record the first and last day of the period of account.
- Check whether it began on or after 1 April 2024.
- If the period of account exceeds 12 months, split the work into a separate claim for each accounting period.
2. Check claim notification
Some companies must notify HMRC in advance that they intend to claim. HMRC’s manual describes a notification period ending six months after the end of the relevant period of account, with conditions under which notification may not be required, including qualifying recent claim history. Confirm the current facts rather than assuming that a repeat claimant is exempt.
3. Document each project
- Describe the field of science or technology.
- State the advance sought over existing knowledge or capability.
- Identify the scientific or technological uncertainties.
- Explain why a competent professional could not readily resolve them.
- Describe the work performed, iterations, failures and resolution.
- Save the HMRC assessment-tool result and the evidence behind each answer.
4. Build the cost schedule
- Extract payroll, supplier, software, data, cloud, consumables and contractor records for the period.
- Allocate only the R&D proportion of shared or mixed-use costs.
- Apply the contractor, connected-party, overseas and payment rules.
- Remove capital, land, rent, rates, leasing, patent, trademark and routine production or distribution costs.
- Reconcile claimed amounts to the accounts and payment records.
5. Prepare the additional information
HMRC requires additional information with an R&D claim. Prepare the project descriptions, cost categories, calculations and supporting facts before filing. If pre-notification is required, complete it in the prescribed sequence; a missing required step can make the claim invalid.
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Complete the relevant Company Tax Return fields and supplementary forms for the selected scheme. Ensure the figures agree with the additional-information submission and the accounting records.
7. Meet the statutory deadline
For a period of account lasting 18 months or less, the claim deadline is generally 24 months from its final day. If the period of account is longer than 18 months, the deadline is generally 42 months from its first day. Put the deadline on the finance calendar early enough to resolve technical and payment evidence issues.
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A defensible file should connect the technical story to the financial calculation. Keep:
- Project plans, technical reports, design records, test results and meeting notes.
- Evidence of the baseline capability and the uncertainty faced.
- Payroll data, job descriptions and time-allocation methodology.
- Supplier contracts, invoices, payment dates and connected-party analysis.
- Cloud, software and data-licence invoices with an R&D-use apportionment.
- Calculations for R&D intensity, enhanced expenditure, losses and any PAYE cap.
- The HMRC project-tool answers and additional-information submission.
- Board or management evidence showing who decided that contracted R&D was required.
Common failure points and fixes
Using the year-end instead of the period start
Problem: Applying post-April 2024 rates to an accounting period that began earlier.
Fix: Anchor every calculation to the first day of the accounting period and separate claims where required.
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Claiming all costs attached to a qualifying project
Problem: Treating a qualifying project as approval for rent, capital assets, routine production or every shared subscription.
Fix: Test each category and apportion mixed-use costs.
Assuming SME status proves ERIS eligibility
Problem: Ignoring the loss-making requirement or the 30% intensity calculation, including connected companies.
Fix: Prepare the intensity computation and check all connected-company data before choosing ERIS.
Letting a contractor claim on the company’s behalf without evidence
Problem: Assuming the supplier’s R&D wording establishes the claimant’s entitlement.
Fix: Document the company’s decision, planning, technical control, contract relationship and payment, then apply the 65% or connected-party rule as appropriate.
Ignoring payment status
Problem: Including unpaid expenditure without checking the payment condition or the staff-cost timing rule.
Fix: Reconcile invoices and payroll to bank or ledger payment records before submission.
Describing RDEC as a guaranteed 20% refund
Problem: Omitting taxability and the PAYE/National Insurance cap.
Fix: Present 20% as the headline credit calculation and model the company-specific tax and cap effects.
When specialist advice is sensible
Professional Corporation Tax or R&D-claim advice can be useful where the file includes overseas work, connected suppliers, substantial contracted R&D, clinical trials, mixed-use cloud infrastructure, a first claim, a transition period or a close ERIS-intensity calculation. The adviser should be able to explain the technical basis, cost apportionment, payment evidence, notification requirement and filing deadline—not merely provide a percentage of expenditure.
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Management remains responsible for the accuracy of the claim. Review the project narratives, cost schedule and scheme choice before authorising submission.
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