R&D Claim

Qualifying businesses can use their R&D claim to either receive a cash payment or a reduction in their corporation tax.

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Research and development (R&D) tax credits are part of the UK Government incentives designed to reward businesses investing in innovation – especially those seeking to improve or overcome challenges related to their products and design processes. The tax credits, administered by the HMRC, support these businesses to invest in resources that will accelerate their R&D and help them to ultimately grow.

The scheme has supported UK businesses across a wide range of industries for over 20 years, and is not limited to supporting a singular field or industry.

Qualifying businesses can use their R&D claim to either receive a cash payment or a reduction in their corporation tax. For businesses making an R&D claim for the first time, they are able to claim credits for their last two completed accounting periods – so it can be backdated too.

How To Make a R&D Tax Claim

1) Apply for Advance Assurance (AA)

For businesses applying for R&D tax credits for the first time, it is worth applying for Advance Assurance (AA). Doing so will allow for the R&D claims to bypass any investigations undertaken by the HMRC during the first three accounting periods. This will help to speed up the claims process.

2) Calculate qualifying costs

This involves providing a breakdown of eligible costs, including how much money the business has spent, and in what areas they have spent money on. Doing so will help to validate a business’ R&D claim.

3) Calculate corporation tax relief or ‘enhancement figure’

This refers to calculating a business’ total tax relief, known as the ‘enhancement figure’.

For the R&D tax credit scheme, this figure is calculated by multiplying your total allowable costs by 130% and then adding that to the original total allowable cost for a combined total of 230%.

For example, if a business’ total allowable costs come to £150,000. This allowable cost total is then multiplied by 130% to reach £195,000.

The business can then add the two figures together to reach the ‘enhancement figure’ of £345,000.

4) Submit ‘enhancement figure’ to the HMRC through your company’s tax return

Submit this figure in box 660 on your company’s tax return.

5) Wait for the HMRC to issue the return

The HMRC will then review the claim and issue your business with R&D tax credits if you are eligible.

Am I Eligible For a R&D Tax Claim?

It is important to remember that any company in any industry may be eligible for R&D Tax Credits as long as they are liable to pay corporation tax. This means that sole traders and partnerships are excluded from the eligibility criteria for R&D claims.

In order to be eligible for to claim for R&D tax credits, a business must meet the following criteria:

  • They must be liable to pay corporation tax
  • They must be a small to medium-sized enterprise business – Less than 500 employees with a turnover of less than £100 million
  • They must be based in the UK (although the business’ R&D activities do not have to take place within the UK)
  • They must have undertaken qualifying R&D activities
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What Counts As a Qualifying R&D Activity?

A qualifying R&D activity must pass the following two tests:

1) There must be a technological advance

The term ‘technological advance’ refers to the work being carried out with the objective to create something new or improve on a product or process that currently exists. This means carrying out R&D to investigate into this, not necessarily producing an outcome.

For instance, the term ‘technological advance’ could refer to a business creating a service that already exists in their industry, but redeveloping the process in a way that has not been done before.

2) There must be a technological uncertainty

The term ‘technological uncertainty’ simply refers to the concept that what a business is trying to achieve is not easily achievable. Essentially, this means the product, service or process your business is wanting to offer is not commonly known amongst industry professionals.

For instance, proving that there is ‘technological uncertainty’ would include explaining how your business’ service will produce the correct outcome, but it is not certain on how to achieve this outcome.

Which Industries Can Apply For a R&D Tax Claim?

If a business is in the process of passing the two tests above, then they are likely to be eligible for a R&D tax claim. It does not matter what industry they fall under. Here is a list of some example industries where businesses have benefited from the scheme:

  • Gaming
  • Apparel
  • Food and drinks
  • IT
  • Agriculture
  • Cosmetics
  • Medical
  • Chemical
  • Packaging
  • Software
  • Marine
  • Insurance
  • Digital advertising
  • Life sciences

How Much Is An R&D Claim Worth?

The amount of R&D tax credits that a business will receive depends on their R&D spend. The calculated ‘enhancement figure’ can help a business to identify exactly what their claim would be worth. While the value of an R&D claim will differ between businesses, it will typically be worth around 25% of the qualifying spend on R&D.

In order to calculate the estimated value of the R&D claim, a business must deduct the ‘enhancement figure’ from their R&D spend.

If the business is profit-making, it is likely that their R&D tax claim will translate into a corporation tax reduction.

If the business is loss-making, it is likely that their R&D tax claim will translate into a cash credit.

In some instances, a business may receive a combination of the two; a reduction in corporation tax as well as some tax credits.

What Are The Benefits Of An R&D Tax Claim?

  • Businesses in any industry can be eligible
  • Many costs can qualify
  • There is no minimum claim requirement
  • Loss-making businesses are able to claim
  • Highly accessible source of funding
  • Fast access to tax credit
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Frequently Asked Questions About R&D Claims

The deadline to submit a R&D claim for an established business is two years after the end of the accounting period if they have already been taking part in R&D activities.

If your R&D claim is successful, your business should receive R&D tax credits within a few weeks.

The HMRC aims to deal with 95% of R&D claims within the first 28 days of their receipt.

A business may claim for qualifying expenses made in their last two accounting periods.

Yes, if the activity is ongoing then there is the potential for past, as well as future R&D claims.


Yes, a business can claim as the purpose of the scheme is not the outcome. Instead, it is the process and intent.