What is Research and Development (R&D) relief? How to claim R&D relief? How does small company R&D relief work? Can individuals claim R&D relief?

This is a freeview 'At a glance' guide to Research and Development (R&D) relief.

Subscribers, see Research & Development (R&D) Relief for your detailed version of this guide.

At a glance

Qualifying expenditure on Research and Development (R&D) tax relief for Corporation Tax in different ways, depending upon the timing of the R&D expenditure and type of company

Additionally, there are R&D capital allowances and Intangibles.

The rate of R&D relief depends on when the R&D expenditure was incurred and which form of tax relief applies:


From 1 April 2024 From 1 April 2023 From 1 April 2020 From 1 Jan 2018 From 1 April 2015 From 1 April 2014  From 1 April 2013

Enhanced deduction rate

186% 186% 230% 230%




Payable credit*

- 10% 14.5% 14.5%




Payable credit: Loss making R&D intensive company** 14.5% 14.5% - - - - -

Above the line expenditure credit (RDEC) 

20% 20% 13% 12%




Notional loss notional tax rate applied to loss-makers in the merged scheme 19% 25%          

 Payable credita are subject to a cap from 1 April 2021.

Loss-making R&D intensive companies are those whose qualifying R&D expenditure constitutes at least 30% (40% for FY 2023) of total expenditure

In order to claim relief, a company must have been engaged in qualifying R&D activity and then satisfy a number of specific conditions.

  • The company must be a going concern.
  • Any single R&D project must not receive Total aid of more than €7.5m.

 Special rules and conditions

  • There are special rules if a company has received state aid in respect of the project.
  • Expenditure is not generally available if it has been subsidised.
  • There are special rules for contracting and Sub-contracting R&D.
  • See R&D subscriber guide for details of how to make claims.

PAYE Cap on payable credits
A cap on any claims under the merged sheme and for payable credits applies subject to a threshold of £20,000 under which the cap will not apply.

  • The cap is the threshold amount plus three times the company’s total PAYE and National Insurance Contributions (NICs) liability for that year.
  • An exemption for genuine R&D businesses.
  • See R&D: SME Tax Credit scheme

What is an SME?

The definition of an SME is taken as a company with fewer than 500 employees and a turnover limit of €100 million or a balance sheet total not exceeding €86 million.

Definition of R&D

R&D is defined in accordance with general accounting practice but is further modified by the guidelines produced by the BIS Guidelines (formerly the Department of Trade and Industry (DTI) Guidelines) in 2004. There must be:

  • Uncertainty that the final objective can be achieved and
  • an advance in science or technology through the resolution of scientific or technological uncertainty.
  • The knowledge being sought must also not be already available in the public domain.

Qualifying costs

The company must have incurred qualifying expenditure on R&D projects.

Government grant funding (notified state aid) provided for R&D projects must be excluded from any R&D claim. An SME may claim enhanced relief under the large company R&D scheme.

Relief under the large company scheme may be claimed on the subsidised expenditure, provided it qualifies as tax-deductible in the normal way. Only the repayable Expenditure Credit (RDEC) is available (see the Subscriber version for details of the Large Company Scheme).

Qualifying costs must have been incurred and cannot be of a capital nature. Revenue costs that have been put to the balance sheet can still be included within the R&D Claim. Capital costs relating to R&D work qualify for capital allowances at 100%.

Qualifying revenue costs include:

  • Data licences and cloud computing
  • Expenditure to advance the field of mathematics
  • Staff costs, subscontractors and externaly provided workers (EPW).
  • Subcontracted R&D must be performed in the UK.
  • EPW expenditure must be subject to UK PAYE and NIC.
  • Materials consumed or transformed.
  • Water and fuel.
  • Specially commissioned parts.
  • Software.
  • Software designed or adapted see R&D software.
  • Subcontractor costs: there are a number of pitfalls and planning points in relation to staffing and subcontractors, these are discussed at length in the Subscriber guide: R&D: Staff costs, subcontractors & reimbursed expenses.
  • A proportion of variable overheads, see R&D claims and overheads.

There is a restriction on expenditure in respect of consumable items that qualify for R&D tax credits where the company sells the products of its R&D activity as part of its normal business. 

To claim R&D relief: summary

  1. Make an application for Advanced assurance (new claimants, if eligible).
  2. Make am Advanced Claim Notification (unless a claim has already been made in one of the last three periods), within six months after the end of the accounting period.
  3. Submit an Additional information form with your CT600 or earlier
  4. Claim tax relief via your Corporation Tax computation and the CT600 and attach your R&D Report

See How to claim: R&D Reliefs

The R&D report

A report should be filed as part of the company tax return as it is current HMRC practice to open an enquiry where no report is supplied. 

Where a company has been contracted to carry out R&D work and cannot make a claim under the SME rules, it may be possible to claim under RDEC 'the large company rules'. See SR&D RDEC Scheme for large companies and grant assisted companies.

Assistance from HMRC

HMRC has several specialist units across the UK which are available to assist with R&D claims.

HMRC's R&D Advance Assurance scheme for companies claiming R&D for the first time. Where assurance is given, the company will face no further enquiries into its claims for the first three accounting periods.

Useful guides on this topic

See Subscriber version of this note.

Our R&D guides:

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Need assistance?

Making a complete and successful R&D claim takes times and requires know-how. Contact the Virtual Tax Partner support service for cost-effective assistance in:

  • Starting a claim.
  • Planning a claim.
  • R&D start-ups.
  • Any other queries on R&D.