R&D tax credits put real money back into UK businesses—yet most eligible companies never claim. If you’re developing software, improving products, or solving technical problems, you could be leaving tens of thousands of pounds on the table.
What Counts as R&D for Tax Purposes?
HMRC’s definition is broader than most people think. R&D for tax relief purposes means seeking an advance in science or technology by overcoming technological uncertainty.
The key question: Was the solution readily available, or did you have to work it out?
If a competent professional in your field couldn’t immediately tell you how to achieve something, that’s technological uncertainty. And overcoming it is R&D.
📌 Common misconception: R&D doesn’t have to be groundbreaking or Nobel Prize-worthy. Incremental improvements, adaptations, and even failed projects can qualify—as long as you faced genuine technical challenges.
Examples of Qualifying R&D
Here’s what we’ve successfully claimed for clients:
Software Development
- Building a SaaS platform with novel functionality
- Creating APIs that required solving data integration challenges
- Developing machine learning models for prediction or classification
- Optimising database performance beyond standard approaches
- Building real-time systems with challenging latency requirements
Product Development
- Designing products with new materials or manufacturing processes
- Improving energy efficiency beyond current standards
- Miniaturisation or performance improvements requiring experimentation
- Adapting existing technology for new applications
Process Improvement
- Automating complex workflows requiring custom solutions
- Developing new testing or quality assurance methods
- Creating more efficient manufacturing processes
How Much Can You Claim?
The benefit depends on your company’s size and profitability:
SME Scheme (Under 500 Employees)
- Profitable companies: Claim an enhanced deduction of 86% of qualifying R&D costs, reducing your Corporation Tax
- Loss-making companies: Surrender losses for a cash credit of up to 10% of qualifying costs
Example: £100,000 in qualifying R&D spend could mean £21,500 off your tax bill (if profitable) or £10,000 cash from HMRC (if loss-making).
RDEC Scheme (Larger Companies)
For larger companies or those receiving grants, RDEC provides a taxable credit of 20% of qualifying costs.
What Costs Qualify?
- Staff costs: Salaries, employer NI, pension contributions for staff working on R&D
- Subcontractors: External developers, consultants, researchers (65% of cost for SME scheme)
- Software: Licences for software used in R&D activities
- Consumables: Materials, utilities used directly in R&D
- Cloud computing: AWS, Azure, GCP costs for R&D projects (from April 2023)
The Claim Process
R&D claims are made through your Corporation Tax return. The process involves:
- Identifying qualifying projects – What work faced technological uncertainty?
- Calculating qualifying costs – Staff time, subcontractors, consumables
- Preparing the technical narrative – Explaining the uncertainty and how you overcame it
- Submitting the claim – As part of your CT600 return
HMRC may enquire into claims, so documentation matters. We prepare claims that withstand scrutiny.
Common Mistakes We See
- Not claiming at all – The biggest mistake. Many eligible companies don’t realise they qualify.
- Underclaiming – Missing qualifying costs or projects
- Overclaiming – Including routine work that doesn’t involve uncertainty
- Poor documentation – Unable to support the claim if HMRC asks questions
- Missing deadlines – You have 2 years from the end of your accounting period to claim
Think You Might Qualify?
We offer a free initial assessment to identify potential R&D claims. Average claim for our tech clients: £45,000.