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Merged scheme (RDEC)
Combines the old RDEC and SME schemes into an “above-the-line” credit. It is now the default scheme for most companies.
R&D Tax Credit Relief · UK
R&D merged scheme
- Claim up to 16.2%
- Replaces SME & RDEC
- Reduction in Corporation Tax
The UK introduced the R&D merged scheme for accounting periods beginning on or after 1 April 2024, replacing the previous SME and RDEC schemes with a single scheme.
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£63,000
Average claim
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2,400+
Claims submitted
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Millions
Recovered for clients
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100%
HMRC compliant
What is the R&D merged scheme?
The merged scheme forms part of the UK Government’s modernisation of the R&D tax relief system. The aim of the merged R&D scheme is to simplify the structure of the relief and improve compliance.
For accounting periods beginning on or after 1 April 2024, most UK companies claim R&D tax credit relief under a single merged scheme based on the RDEC model. This replaces the previous split between the SME scheme and RDEC for most claimants, creating a more consistent framework for claiming relief.
R&D tax relief is available to claim where a company undertakes projects that have attempted to resolve scientific or technological uncertainty. Below we have shared the differences between the old RDEC scheme and the new merged R&D scheme.
Compare HMRC merged scheme & ERIS R&D tax relief rates
Understand the requirements and key changes for R&D tax credits schemes
Swipe sideways to compare all options
| Company type | Merged scheme | Enhanced R&D intensive support |
|---|---|---|
| Primary target | All companies (default) | Loss-making R&D intensive SMEs |
| R&D intensity req. | None | ≥ 30% |
| Benefit mechanism | 20% taxable credit | 86% add. deduction + 14.5% credit |
| Cash value (approx.) | Up to ~15%-16.2% of spend | Up to ~27% of spend |
| Credit taxable? | Yes: taxable income | No: non-taxable cash payment |
| CNF required? | Yes | Yes |
Which R&D tax credit scheme is right for you?
Can’t decide which scheme is right for your business? We understand finding the right scheme for your business is key!
From 1 April 2024, the UK’s R&D tax relief rules changed significantly. Most companies now claim under the merged scheme, which uses a taxable RDEC at a general rate of 20%. Loss-making SMEs that meet the 30% R&D intensity threshold may instead qualify for ERIS, which can provide a benefit of around 27%.
Enhanced R&D intensive support (ERIS)
A specialised, more generous regime designed for loss-making SMEs that invest a significant portion of their expenditure in R&D.
Merged scheme
For most companies, a taxable expenditure credit of 20% of qualifying expenditure, worth about 15%–16.2% after tax, sometimes referred to as RDEC.
Who it’s for: Large companies and SMEs not qualifying for ERIS.
Eligibility: The Limited company must be trading.
Benefit: An “above-the-line” expenditure credit, usually 20% of qualifying expenditure, which is taxable.
Prerequisite: A Claim Notification Form (CNF) must be submitted to HMRC within 6 months of the end of the period of account if the company is claiming for the first time or has not claimed in the previous three years. For instance, if your accounting period ends on 31 December 2026, the deadline is 30 June 2027.
Key features: Allows for subcontracted R&D costs to be claimed in more scenarios. It is subject to a PAYE cap of £20,000 plus 300% of PAYE/NIC liability.
- Cash credit rate: N/A (taxable)
- Relief rate: 20% expenditure credit
Not sure if your work qualifies?
Many companies have eligible R&D activity without realising it. We’ll review your projects at no cost.
Check your eligibility
Who can claim under the merged scheme?
A company may be eligible to claim under the merged R&D scheme if it meets several areas of the eligibility criteria.
For the company to qualify they must:
Be subject to UK Corporation Tax
Undertake projects with the attempt to resolve scientific or technological uncertainty
Carry out work that goes beyond baseline knowledge in the relevant field
Use competent professionals to lead or conduct the technical work
For most companies, the merged scheme replaces the previous structure. However, loss-making SMEs that spend heavily on R&D may be eligible under the Enhanced R&D Intensive Support (ERIS) scheme, which offers a higher rate of relief. Learn more about ERIS here.
To be eligible for claiming R&D tax credits, the presence of uncertainty is a crucial piece of information to disclose. If a competent professional cannot readily determine how to achieve a technical outcome using existing knowledge, the work may qualify as R&D for tax purposes.
What qualifies as eligible R&D costs?
Businesses can claim R&D tax credits on qualifying expenditure that directly relates to the R&D activities undertaken.
Typical qualifying eligible expenditure includes:
Qualifying R&D expenditure generally falls into six main categories of revenue costs that relate directly to qualifying R&D activity.
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Staff costs
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Externally provided workers (EPW)
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Software
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Consumables
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Data and cloud computing
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Prototypes
Non-qualifying expenditure typically includes:
Expenditure that falls outside the qualifying categories, or costs that don’t relate directly to qualifying R&D activity, cannot be included.
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Capital expenditure
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Production and distribution costs
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Routine testing and analysis
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Indirect overhead costs
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Intellectual property costs
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Specific staff costs
Above-the-line taxable credit
Applies broadly to all companies undertaking qualifying R&D, regardless of size or profitability. Under the merged R&D scheme, qualifying R&D expenditure operates as an above-the-line taxable credit (the R&D Expenditure Credit). Relief is provided as a taxable expenditure credit which is brought into account as income in the Corporation Tax computation, rather than as an enhanced deduction. R&D tax relief under the merged scheme typically produces one of two outcomes.
Mechanics: Profitable companies
The taxable expenditure credit increases taxable profits but reduces the Corporation Tax payable. The effective benefit is typically around 15–16% of qualifying expenditure.
Mechanics: Loss-making companies
The expenditure credit may result in a payable amount, subject to the merged scheme’s payment steps and restrictions. The effective benefit depends on the company’s Corporation Tax position.
How the merged scheme relief works
Qualifying expenditure generates an above-the-line R&D Expenditure Credit (RDEC), which is brought into account as taxable income in the Corporation Tax computation, not as an enhanced deduction.
Claims are submitted as part of the company’s Corporation Tax return. The process involves five stages:
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Identify qualifying R&D activity
Map each project against HMRC’s definition of R&D and identify the scientific or technological uncertainties addressed.
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Calculate eligible expenditure
Identify and apportion staff, software, consumables and other eligible costs relating to the qualifying R&D activity.
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Prepare the technical report
Document the qualifying projects, technological baseline, uncertainties encountered and the work undertaken to resolve them.
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Prepare the Additional Information Form (AIF)
Provide the required project descriptions and qualifying expenditure details through HMRC’s Additional Information Form (AIF).
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Submit within the Corporation Tax return
Include the R&D claim in the Company Tax Return for the relevant accounting period and submit to HMRC.
What counts as qualifying R&D under the merged scheme?
In the official guidelines, HMRC defines qualifying R&D activity as work that seeks an advance in science or technology through the resolution of uncertainty. The activity undertaken must involve a process of investigation or experimentation designed to resolve the uncertainty.
Eligible
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Seeking to advance in science or technology
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Involve scientific or technological uncertainty
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Require an investigation or experimentation process
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Developing new software systems or algorithms
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Creating new engineering designs
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Improving manufacturing processes
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Testing and refining technical prototypes
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Developing new data processing methods
Not eligible
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Overseas restrictions
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Routine software updates
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Non-technical advances
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Standard engineering
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Production and distribution
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Routine quality assurance
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Commercial, financial and legal work
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Market research and customer testing
- Fully managed R&D claims
- HMRC-compliant technical reports
- No win, no fee assurance
- Specialist UK R&D advisers
What our clients say
Independent Google reviews from businesses we’ve helped claim R&D tax relief.
FAQs about the R&D merged scheme
The merged scheme applies to accounting periods beginning on or after 1 April 2024. Earlier periods are still claimed under the old SME or RDEC schemes.
No. Both schemes have been replaced by the merged scheme, which most companies now claim under. The exception is loss-making, R&D-intensive SMEs, which may qualify for the ERIS scheme instead.
Yes. A project that fails can still qualify, provided it was a genuine attempt to resolve scientific or technological uncertainty. HMRC looks at the nature of the work, not whether it succeeded.
Yes. Company size does not decide eligibility. What matters is whether the work meets HMRC’s definition of qualifying Research and Development, meaning it seeks an advance in science or technology by resolving genuine uncertainty.
Yes. For accounting periods beginning on or after 1 April 2024, grants and subsidies no longer reduce the expenditure you can claim. Different rules applied under the old schemes, so earlier periods need checking separately.
If a Claim Notification Form was required and was not submitted within 6 months of the end of the accounting period, the claim is invalid. A CNF is not usually needed if the company has made an R&D claim in the previous three years, although exceptions apply, for example where HMRC rejected the earlier claim.
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