When and how to apply for R&D tax credits in the UK

R&D tax relief is a UK Corporation Tax incentive designed to support companies undertaking qualifying research and development. Despite this, many claims are delayed or rejected due to missed deadlines or insufficient technical evidence. 

With HMRC’s focus on compliance, evolving legislation, and the transition to the Merged Scheme, understanding when and how to apply for R&D tax credits can help make the process of claiming smoother and more efficient. 

This guide explains what you need to know about applying for R&D tax credits. We explore topics such as: 

• Key deadlines
• Eligibility considerations
• Practical steps to help your business claim confidently and compliantly

What are R&D tax credits?

R&D tax relief is a UK government incentive that allows eligible businesses to receive either:

• A reduction or refund of Corporation Tax
• A cash payment if the company has losses to surrender

To qualify, a project must seek an advance in science or technology and involve technical uncertainty that a competent professional could not readily resolve using existing knowledge or capability. 

It is often believed that R&D is only available for laboratories or scientific research. However, this is not true. From software development to product innovation, these types of projects often qualify for R&D tax credits, provided the latest statutory criteria and UK-based activity rules are met.

When should you apply for R&D tax credits?

Companies must be aware of the statutory deadlines to ensure compliance during the R&D tax relief process. There are two key deadlines:

1. The claim notification deadline

For accounting periods beginning on or after 1 April 2023, companies may be required to submit a Claim Notification Form.

You must notify HMRC if:

• You are a first-time claimant
• Your company has not made a valid R&D claim in any of the previous three accounting periods
• A previous claim was invalid and therefore not treated as a valid claim

The notification window starts on the first day of the company’s accounting period. The end date will be six months after the end of that period of account. If the required Claim Notification Form is not submitted within this window, HMRC will treat the claim as invalid.

1. The Corporation Tax claim deadline

An R&D claim is made within the Corporation Tax Return. The amendment window is 24 months from the end of the relevant accounting period. 

Companies can amend earlier returns within this period, provided a Claim Notification Form has been submitted where required.

Missing either of these deadlines can prevent a valid R&D claim from being made.

Which R&D scheme applies?

For accounting periods beginning on or after 1 April 2024, companies can claim under the Merged R&D Scheme. This scheme is a combination of the former UK’s SME and RDEC schemes for most new accounting periods. 

A separate Enhanced R&D Intensive Support (ERIS) scheme is available to loss-making SMEs that meet an intensity threshold by spending at least 30% of their total expenditure on qualifying R&D.

Eligibility depends on the company’s accounting period, the loss-making position, and the proportion of overall expenditure spent on qualifying R&D.

How to apply for R&D tax credits: step-by-step

A compliant R&D tax credit claim involves more than estimating figures on a tax return. HMRC expects clear technical justification and accurate financial calculations. 

Step 1: Confirm your project qualifies

Before submitting a claim, assess whether the activities meet HMRC’s definition of R&D. 

Key questions include:

1. Was there genuine scientific or technological uncertainty?
2. Did the project seek an advance in science or technology?
3. Could the solution have been readily resolved by a competent professional?

Common qualifying sectors include:

• Software and SaaS
• Manufacturing
• Engineering
• Life sciences
• Construction innovation

If the work is routine or commercially focused without encountering any scientific or technological uncertainty, it is unlikely to qualify.

Step 2: Identify qualifying expenditure

Once eligibility is established, companies must calculate qualifying R&D expenditure in line with HMRC guidance and relevant legislation. 

Common expenditure categories may include:

• Staff salaries, employer’s NIC and pension contributions relating to the time spent on qualifying R&D activities
• Subcontractor costs
• Externally Provided Workers
• Software licence costs directly attributable to qualifying R&D
• Consumable items such as materials, utilities, and components used or transformed in the R&D process
• Data and cloud computing costs, where permitted

For accounting periods beginning on or after 1 April 2024, expenditure on overseas subcontractors and Externally Provided Workers is generally no longer eligible under the Merged Scheme, unless it meets the statutory definition of qualifying overseas expenditure. This may apply where legal, regulatory, or environmental conditions mean the work cannot reasonably be undertaken in the UK.

All expenditure must be supported by clear allocation methodology and appointed to the statutory accounts. Unsupported or overstated costs are a common trigger for HMRC enquiry.

Step 3: Prepare the technical narrative

This is a step where many claims fail to qualify for R&D tax credits due to insufficient technical explanation. HMRC requires the project narrative to follow a strict format within the Additional Information Form (AIF). 

HMRC expects a clear explanation of:

• The scientific or technological advance sought
• The baseline level of knowledge in the field
• The specific technical uncertainties encountered
• The work undertaken to resolve the uncertainties
• Why the solution was not readily deducible by a competent professional

Avoid generic or marketing-style language as this could trigger an HMRC enquiry. An R&D technical narrative should clearly explain the scientific or technological advance sought, the baseline knowledge, the technical uncertainties, and the work undertaken to resolve them.

Step 4: Complete the Additional Information Form

HMRC requires an Additional Information Form (AIF) to be submitted digitally before the CT600, or on the same day if the form is submitted first. HMRC will reject the R&D claim if the Corporation Tax Return is sent before the Additional Information Form. 

The Additional Information Form includes:

• Details of qualifying projects
• Qualifying cost breakdowns
• Contact details of the responsible individual
• Details of any R&D advisers involved in the project

If this form is incomplete or incorrect, the claim may be invalidated by HMRC.

Step 5: Submit via your CT600

The R&D claim is formally made within your Corporation Tax Return (CT600). 

Ensure that:

• Figures reconcile with the statutory accounts
• Supporting information is included
• The R&D claim is clearly identified

After submission, HMRC may process the claim, request further information, or in some cases, open a compliance enquiry.

Common mistakes to avoid

HMRC continues to increase scrutiny of R&D claims. 

Common causes of HMRC enquiry or rejection include:

• Missing the Claim Notification deadline
• Submitting vague technical descriptions or using marketing-style language
• Overclaiming costs or costs that were incorrectly allocated
• Using advisers with a history of non-compliance

Companies sometimes assume that responsibility sits completely with their adviser. However, the company remains legally responsible for ensuring that the claim is technically and financially accurate, regardless of who prepares the documentation.

Claims prepared without appropriate technical expertise may increase the risk of non-compliance.

Final thoughts

R&D tax relief can reduce Corporation Tax or generate a payable credit for qualifying companies. With evolving legislation, stricter evidence standards, and tightened HMRC scrutiny, a compliant and well-documented approach to research and development is essential. 

If your business is investing in innovation, ensure that these key actions are clearly addressed:

• Check your eligibility early
• Track UK-based qualifying expenditure accurately
• Prepare clear technical documentation
• Monitor claim deadlines carefully
• Seek R&D specialist advice where required

At Alexander Clifford, we prepare R&D tax relief claims with a focus on technical accuracy and HMRC compliance. Our team of industry experts are always happy to answer your questions or concerns. For more information regarding claiming R&D tax relief in the UK, please don’t hesitate to contact our team.