What changed in April 2024
For years, UK businesses claimed R&D tax relief through two separate schemes depending on their size — the SME scheme for smaller businesses, and the Research and Development Expenditure Credit (RDEC) for larger companies. From 1 April 2024, both were replaced by a single Merged Scheme, which operates on RDEC-style mechanics for nearly all claimants.
If you claimed under the old SME scheme before 2024, the way your relief is calculated has changed. The headline rates look different. But for many owner-managed businesses and SMEs, the practical outcome — a meaningful tax credit on qualifying development spend — remains very much available.
How the Merged Scheme works
Under the Merged Scheme, you receive a taxable credit worth 20% of your qualifying R&D expenditure. This credit is offset against your corporation tax bill. After the notional tax charge of 19% is applied, the effective benefit works out at approximately 15% of qualifying spend for profit-making businesses, and around 16.2% for loss-making businesses.
That means for every £100,000 your business spends on qualifying R&D activity — staff time, subcontractors, consumables — you could receive around £15,000–£16,200 back. For a business spending £300,000 on development work, that is £45,000–£48,600 in relief. Not something to leave unclaimed.
| Scheme | Who it applies to | Effective relief rate |
|---|---|---|
| Merged RDEC | Most UK companies (profit-making) | ~15% of qualifying spend |
| Merged RDEC | Loss-making companies | ~16.2% of qualifying spend |
| ERIS | Loss-making SMEs spending 30%+ on R&D | Up to 27% of qualifying spend |
The ERIS exception — R&D-intensive SMEs
There is one important exception. Loss-making SMEs that spend at least 30% of their total expenditure on qualifying R&D can claim under the Enhanced R&D Intensive Support (ERIS) scheme instead, which provides a more generous effective rate of up to 27%. This was retained specifically to support genuinely R&D-intensive small businesses — typically early-stage companies putting the bulk of their resources into development rather than commercial operations.
If your business is pre-revenue or early-stage and most of your costs are development costs, it is worth checking whether ERIS applies to you.
What counts as qualifying expenditure
The Merged Scheme allows you to claim on the following categories of cost:
- Staff costs — salary, employer NIC, and pension contributions for employees directly engaged in R&D work
- Subcontractor costs — payments to external contractors working on qualifying R&D, subject to a 65% cap on costs from unconnected parties
- Consumable materials — materials used up or transformed during the R&D process
- Software licences — software used directly in qualifying development work
- Data licences and cloud computing — introduced in recent years, now fully qualifying under the Merged Scheme
You cannot claim on capital expenditure, general overheads, or the production and commercial deployment of a completed product or process — only the development phase itself.
How to make a claim
Claims are submitted as part of your company's corporation tax return (CT600). Critically, since August 2023, all claims must also be accompanied by an Additional Information Form (AIF) submitted to HMRC directly — this is a separate requirement that some businesses have missed, causing their claims to be rejected on a technicality.
Claims can be made within two years of the end of the accounting period in question, so there may be scope to look back at prior years if you have not previously claimed.
Most specialist R&D advisers operate on a no-win-no-fee basis. If a claim is not successful or does not qualify, you pay nothing. Given the amounts at stake — and the complexity of the AIF requirements — getting specialist support is usually worth it.
What about businesses that claimed under the old SME scheme?
If your business claimed under the SME scheme before April 2024 and your accountant simply renewed the claim on the same basis, it is worth checking whether the claim was properly migrated to Merged Scheme mechanics. Not all generalist accountants have updated their approach, and a claim submitted on old-scheme logic after the transition date may be incorrect.
This is one of the most common issues seen by specialist R&D advisers in 2025 and 2026 — businesses whose claims have inadvertently been processed incorrectly because their accountant did not fully update their approach after the April 2024 transition.
Find out what your business could claim
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