Making an R&D tax credit claim can secure vital funding for your business, but HMRC compliance standards have become stricter. Alexander Clifford handle the complexities of claiming, so you can get the best payout without unnecessary enquiries.
In this HMRC R&D claim guide, we discuss seven key steps: how to claim R&D tax credits.
What are R&D tax credits?
R&D tax credits are a government incentive encouraging businesses to invest in new products and services. The scheme allows UK companies to recover a portion of costs spent on innovation.
The scheme is for companies in science and technology – including software development, manufacturing and engineering – allowing businesses to invest in future growth without financial risk.
Making an R&D tax credit claim can help reclaim up to 27% of qualifying R&D costs, although rates depend on the scheme you’re applying through, and your accounting period.
Businesses with accounting periods beginning before 1 April 2024 can claim under:
- SME R&D tax relief scheme – for companies with fewer than 500 staff and turnover under €100m or assets under €86m. Offers an 86% additional deduction (total 186%) and, for loss-making SMEs, a payable credit of 10% or 14.5% if R&D-intensive
- R&D Expenditure Credit (RDEC) scheme – for large companies or SMEs carrying out subsidised/subcontracted R&D. Provides a 20% taxable expenditure credit, giving an effective net benefit of around 15% after Corporation Tax
Accounting periods beginning after 1 April 2024 will claim under:
- Merged R&D tax relief scheme – applies to most companies with accounting periods beginning on or after 1 April 2024, offering a single 20% expenditure credit (around 15% net benefit after tax)
- Enhanced R&D Intensive Support (ERIS) – available to loss-making SMEs spending at least 30% of total expenditure on qualifying R&D, providing a 186% total deduction and a 14.5% payable credit on surrenderable losses
Making an R&D tax claim – am I eligible?
When making an R&D tax credit claim, eligibility depends on three key criteria. So what’s needed for an R&D claim?
You must:
- Be a UK-registered entity paying Corporation Tax
- Seek an advance in science or technology
- Have less than 500 employees and either a turnover of under €100 million or a balance sheet total of under €86 million (for the SME scheme on an accounting period that began before 1 April 2024)
Qualifying R&D projects include:
- Creating new ways to dispose of chemical waste
- Developing new screening methods for illnesses
- Creating greener payment method systems
Which costs can I claim?
Eligible expenditure includes:
- Staff expenditure – salaries, NICs and pensions for eligible employees
- Consumable costs – resources, utilities and materials used for R&D
- Subcontractor fees – subject to strict criteria
What are the 6 key steps to making an R&D tax credit claim?
There are six R&D tax claim steps when considering how to claim R&D tax credits. We take you through the full R&D tax credit claim process. Find out what’s needed for an R&D tax claim:
Step 1: Identify your eligible R&D projects
Review your last accounting period and identify all projects that involved research and development.
Hold workshops with technical teams to record activities that contributed to development, testing, or improvement. A review at this stage ensures no qualifying work is missed in your R&D tax claim steps.
Step 2: Calculate your qualifying R&D expenditure
The next step in the R&D tax credit claim process is to add up your qualifying R&D expenditure. Include:
- Staff salaries, NIC and pension contributions
- Subcontractor or externally provided worker costs
- Software licences and consumables
- Prototypes and utilities
Use accurate time apportionment and record-keeping. Inaccurate cost allocation is one of the common mistakes in R&D tax credit claims.
Step 3: Take note of pre-claim deadlines – the Additional Information Form (AIF)
Filing an additional information form (AIF) is mandatory for every claim submitted after April 2023. It details your activities and costs, and helps you stay compliant. Claiming through an R&D tax credit specialist can help you ensure this is filed accurately and on time.
Step 4: Prepare your technical narrative
When making an R&D tax credit claim, your technical report should detail clear evidence of your eligibility:
- Define your scientific or technological advance sought
- Outline your uncertainties or obstacles faced
- Detail the work undertaken to resolve them
- Evidence why a competent professional could not easily solve the issue
A clear technical report for your R&D claim without complicated jargon will help HMRC officers understand your advance and avoid enquiries.
Step 5: Complete your CT600/CT600L form and file your claim
Next, you or your R&D advisor should assess your tax computation. It’s important to enter accurate figures into the correct boxes in your CT600 for for R&D.
Step 6: Wait for HMRC to process your claim and issue your benefit
What happens after you submit an R&D claim? HMRC will verify that your claim is compliant by checking your narrative and evidence to ensure all required details are provided.
So, how long does an R&D tax claim take? After submission, HMRC typically processes R&D claims within 4-6 weeks, although complex claims or submissions with errors can take longer. Look out for any correspondence or enquiries.
Following the tax claim steps, the benefit you receive may be:
- A cash credit (for loss-making companies)
- A reduction in your Corporation Tax liability
- Or a surrender of taxable loss for cash
What are common mistakes made on R&D claims?
Errors are common when making an R&D tax credit claim, which is why it can be beneficial to seek help from an experienced R&D advisor. The most common mistakes in R&D tax credit claims include:
- Missing information or errors in technical narratives
- Including non-qualifying expenditure
- Missing evidence or lack of contemporaneous documentation
- Filing under the wrong scheme or misunderstanding SME boundaries
These can trigger HMRC enquiries, slowing down your HMRC R&D claim process.
If you’re unsure what is needed for an R&D tax claim, speak to one of our R&D tax credit specialists for tailored advice.
Should I file through an R&D tax credit specialist?
If you’re wondering ‘can I make an R&D claim myself?’, it’s important to know the risks. DIY claims often miss out on eligible expenditure or don’t pass HMRC scrutiny.
Partnering with a specialist ensures your R&D tax claim secures the maximum eligible benefit, stays compliant and avoids delays or penalties for a smooth R&D tax credit claim process.
R&D tax credit specialists to ensure all R&D tax claim steps are complete, saving you time and reducing financial risk.
How to claim R&D tax credits – FAQs
Common queries we receive about our HMRC R&D claim guide include:
What is the absolute deadline for making an R&D tax credit claim?
You have two years from the end of your accounting period to submit your claim to HMRC. Therefore, if your accounting period ends 31 March 2024, you’ll need to claim by 31 March 2026.
How long does it take to receive the money from an R&D claim?
HMRC aims to either contact or make payment for 85% of eligible claims within 40 days. In 2023 to 2024, HMRC exceeded this target, processing 92% of claims within 40 days.
What happens if HMRC opens an enquiry into my R&D claim?
HMRC may request further documentation. For enquiries concluded in 2019-2020, the average length of enquiry was 17 months. A well-structured technical report for your R&D claim can speed up resolution. The outcome can include reduced benefits, penalties and tougher checks for future claims.
If my company is loss-making, can I receive the R&D tax credit as cash?
Loss-making firms can benefit from R&D tax credits, whichever scheme you claim through. For the R&D-intensive SME scheme (for accounting periods 1 April 2023 – 1 April 2024), you could get a deduction of 186% on your qualifying expenses.
