How much is an R&D claim worth?

The financial value of an R&D tax relief claim will depend on a variety of factors.

These factors include:

• The timing of the accounting period the claim relates to
• Whether the company is profit-making or loss-making
• The proportion of company expenditure linked to qualifying R&D activity

Each of these variables affects how R&D tax relief is calculated and which rates apply to the claim.

The UK R&D tax relief framework has changed several times in recent years. As a result, the value of an R&D tax credit claim can vary even when the underlying R&D activity remains similar. The merged R&D scheme now forms the default framework for R&D tax relief for accounting periods beginning on or after 1 April 2024. Qualifying R&D-intensive SMEs can claim an additional deduction of 86% of qualifying Research and Development (R&D) expenditure, on top of the normal 100% deduction.

For accounting periods beginning on or after 1 April 2024, R&D tax credit claims are calculated under one of two frameworks:

• Merged scheme – This scheme replaces the previous SME and RDEC schemes with a single combined framework. The purpose of the merged scheme is to streamline R&D tax incentives and encourage UK innovation.
• ERIS – The Enhanced R&D Intensive Support scheme applies to loss-making R&D-intensive SMEs that meet the relevant eligibility criteria. This scheme can be suitable for pre-revenue or early-stage UK companies, however it must meet the loss-making, SME, and R&D-intensive conditions.

Using an R&D tax credit calculator can provide an estimate of the potential value of a claim, although the final outcome will depend on the company’s detailed tax position and eligibility.