R&D Tax Relief in the UK: What Companies Need to Know From 1 April 2024
Updated for the new merged R&D regime
From 1 April 2024, the UK’s R&D tax relief landscape has changed significantly. Rather than separate schemes for small and medium‑sized enterprises (SMEs) and larger companies, most businesses now claim relief under a single, merged R&D tax credit scheme. These reforms aim to simplify how companies claim relief, but they also introduce new rules that all R&D claimants should understand.
What Changed on 1 April 2024?
Historically, UK companies could claim R&D tax relief through two separate regimes:
The SME R&D tax relief scheme, and
The R&D Expenditure Credit (RDEC) for larger companies.
From 1 April 2024, these have been largely replaced by a merged scheme that adopts many features of the former RDEC but applies uniformly across company sizes.
Under the merged R&D scheme, companies receive an above‑the‑line credit, meaning the benefit appears in the profit and loss account rather than only in the tax calculation. This marks a shift from the old SME model.
How the Merged Scheme Works
Here’s a breakdown of the key points:
One Main Scheme for Most Companies
Most claimants now fall under the merged R&D tax credit model, which follows RDEC‑style rules but streamlines the process.Eligibility is Broad, but Definitions Matter
To qualify, your activities must still involve advancing science or technology and resolving uncertainty - consistent with HMRC’s R&D definition.Contracted‑Out R&D Gets New Treatment
Under the merged scheme, rules now specify which party can claim relief when activities are subcontracted. This is a noteworthy departure from previous practice and affects many development partnerships.Overseas R&D Costs
The new regime also tightens how overseas R&D expenditure can be claimed, with only qualifying overseas spend applying in limited cases.
Enhanced Support for R&D‑Intensive SMEs
For some loss‑making SMEs, a separate support regime still operates alongside the merged scheme. Known as Enhanced R&D Intensive Support (ERIS), it offers a larger payable credit if a company spends a high proportion of its total costs on R&D.
To qualify as ‘R&D intensive’, companies must meet a threshold where their R&D expenditure accounts for a significant share of overall expenditure - currently 30% for periods beginning after April 2024.
ERIS provides a greater cash‑back benefit than the standard merged scheme for loss‑making claimants, making it especially relevant for tech‑focused startups and R&D‑heavy firms.
Practical Tips for Claiming R&D Relief
Whether you’re a startup or an established SME, these practical steps can help improve the strength of your R&D claim:
Understand Qualifying Activities
Not all innovation counts. Work must involve real technological advance and uncertainty. Ensure your project descriptions can clearly justify why the work qualifies - narrative and technical detail matter.
Identify Which Scheme You’re Under
For periods beginning before 1 April 2024, older SME rules still apply. After that date, most claimants move to the merged scheme, with the intensive support option for eligible loss‑making SMEs.
Beware of Compliance Risks
HMRC’s compliance checks have become more detailed in recent years, and inadequate or vague claims can lead to enquiries or adjustments. Detailed documentation and clear justification are essential.
Conclusion
The R&D tax landscape in the UK has been reshaped for accounting periods starting from 1 April 2024. The new merged R&D tax relief scheme simplifies the previous regimes, brings above‑the‑line benefits to most companies, and adjusts how contracted and overseas R&D is treated. A stand‑alone intensive support scheme remains for qualifying loss‑making SMEs.
For businesses investing in innovation, understanding these rules, and preparing strong, compliant claims - is more important than ever. Harnessing the full benefit of R&D tax relief requires both strategic planning and careful documentation.
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