R&D Tax Credit Calculator

Since 1 April 2024 a single merged R&D scheme has replaced the separate SME and RDEC reliefs, so most companies now claim the same way. Before the merger, relief split between SME R&D Relief, for companies with turnover under €100M and fewer than 500 employees, and RDEC for larger companies and certain SMEs. Under the merged rules a qualifying company receives a taxable above the line credit of 20% of eligible R&D expenditure, which either reduces the Corporation Tax bill or produces a cash credit for a loss maker. Qualifying costs are totalled first, then any grant or subsidised income connected to the R&D is taken off.

Companies whose qualifying R&D is 30% or more of total expenditure count as R&D intensive and can claim an enhanced 27% under Enhanced R&D Intensive Support, down from 33% before April 2023. A loss making company in that position may surrender its losses for a payable credit at the higher rate, which is often what keeps a pre revenue business funded. Across the merged scheme the net benefit after tax usually lands between 14% and 16.2% of qualifying expenditure. Spend £100,000 and the gross credit is £20,000, which leaves £15,000 after tax for a company paying the 25% main rate and £16,200 in cash for a loss maker, whose credit is taxed notionally at 19%.

HMRC's test for what counts is narrow. A project has to seek an advance in science or technology by resolving scientific or technological uncertainty that a competent professional could not readily deduce. Developing new algorithms, materials, processes or products generally qualifies, as does improving efficiency where nobody knows in advance whether the approach will work, and repeated trial and error is good evidence that real uncertainty existed. Routine product development, market research, purely aesthetic design and social science research all fall outside. Much ordinary software work is excluded too unless it solves a genuine technical challenge, and this is the area HMRC has examined most closely since 2023.

On the cost side, staffing is normally the largest line and covers salaries, employer NI and pension contributions for people directly engaged in the work. Subcontracted R&D and externally provided agency workers both count at 65% of what you pay, with restrictions on UK and overseas work introduced from 2024. Software and cloud computing costs have been claimable since April 2023, and consumable items such as the heat, light and power used in the R&D area qualify as well. Capital expenditure does not belong here and goes through capital allowances instead, and neither production overheads nor marketing can be included.

Claims go in through the Corporation Tax return, but the paperwork starts earlier. A company that has not claimed in the previous three years must pre-notify HMRC, and since August 2023 every claim needs an Additional Information Form submitted through gov.uk before the return itself. The form carries the technical narrative, setting out what the uncertainty was and how it was tackled, together with a cost breakdown by category, and a named senior officer of the company has to endorse it.

HMRC compliance checks have doubled since 2023 and a great many speculative claims have been rejected, so contemporaneous project records, timesheets and technical documentation count for more than a narrative written up long afterwards. Advisers typically charge 15% to 25% of the claim value on a success basis, or a fixed fee of £2,000 to £8,000. Poor advisers pushed rejection rates above 50% in 2023 and 2024, which is a fair argument for using a chartered tax adviser, a member of CIOT or CIMA, or an accountant who has handled R&D work before.