Understanding R&D tax relief in today’s environment

R&D tax relief remains an established part of the UK tax system, but the framework around it has changed significantly. Businesses now need to consider which scheme applies, whether advance notification is required, what information must be submitted and how contracting arrangements affect the claim.

This does not mean that the underlying standard for a well-prepared claim is new. The central questions have always concerned the scientific or technological advance sought, the uncertainty faced and the work undertaken to try to resolve it. What has changed is the scheme structure and the way that information is provided as part of the claim process.

The core eligibility test remains the starting point

A commercial project is not automatically an R&D project for tax purposes. The work must seek an advance in a field of science or technology and address a scientific or technological uncertainty — in plain English, a question that a suitably experienced professional in the field could not readily answer using publicly available knowledge or standard practice.

The company’s competent professionals are best placed to explain the starting point, the intended advance, why the answer was not readily available and what was done to resolve the uncertainty. External advisers can explain the legislation and guidance, help structure that information and challenge whether the reasoning is clear and complete. The technical judgement itself remains with the business.

The scheme structure has changed

For accounting periods beginning on or after 1 April 2024, the previous SME and RDEC schemes were replaced by the merged R&D expenditure credit scheme and Enhanced R&D Intensive Support (ERIS). The merged scheme is available to companies that meet its conditions. ERIS is aimed at loss-making, R&D-intensive SMEs that satisfy the relevant intensity test.

The accounting period matters. A claim may relate to an earlier set of rules, the current rules or, where a period spans a change, more than one calculation. Before estimating the benefit, a business should establish which scheme applies and check the conditions in force for that period.

The process now requires earlier attention

Every new claim must be supported by an additional information form. It must be submitted before, or on the same day as, the Company Tax Return — and first if both are filed on the same day. The form asks for company and adviser details, qualifying expenditure and descriptions of the relevant projects.

Some companies must also submit a claim notification form. This commonly applies to first-time claimants and to businesses whose previous claim falls outside the prescribed three-year look-back. The notification window ends six months after the end of the relevant period of account. Because the rules include exceptions, the position should be checked rather than assumed.

Contracts and the location of activity can affect the outcome

Under the current schemes, responsibility for contracted-out R&D can determine which company is entitled to claim. The wording of agreements, the nature of the activities and the commercial arrangements all need to be considered; labels such as ‘subcontractor’ or ‘customer project’ do not settle the tax position by themselves.

Restrictions also apply to certain overseas contractor and externally provided worker costs, subject to defined exceptions. Businesses with group companies, third-party developers, testing partners or overseas teams should review these arrangements early, while the underlying facts and contractual records are readily available.

Clarity matters more than volume

A clear claim connects the technical position with the costs being claimed. It should explain:

• the relevant field of science or technology and the starting level of knowledge or capability;
• the advance the company sought;
• the uncertainty that could not readily be resolved by a competent professional;
• the work undertaken to address that uncertainty; and
• how the qualifying activities relate to the expenditure included.

The aim is not to produce the longest possible report. It is to present a coherent account supported by proportionate records. Project plans, design decisions, test results, technical discussions, time records and cost data may all help, depending on how the business operates. The evidence should reflect the work that actually took place.

What businesses should do now

R&D claims are easier to prepare when tax, finance and technical teams plan together. Businesses should check notification deadlines, identify the applicable scheme, review contracts and overseas activity, involve competent professionals and retain information throughout the project rather than reconstructing it at the end of the year.

Knight R&D takes a tailored approach to this process. We help clients understand the rules that apply to their accounting period, structure the technical and financial information, and test whether the claim explains the position clearly. This supports the company’s own technical judgement while helping its advisers prepare an accurate Corporation Tax submission.

Current guidance checked August 2026: merged scheme and ERIS; claim notification; and additional information requirements. Tax rules and guidance may change; the position should be checked for the relevant accounting period.