For accounting periods beginning on or after 1 April 2024, most companies claim under the merged R&D expenditure credit scheme. Loss-making SMEs that are R&D intensive can claim enhanced R&D intensive support (ERIS) instead. Both are administered by HM Revenue and Customs. Eligibility has two halves: the company must be within the charge to Corporation Tax and carrying out the work itself, and the work must be R&D as the government's guidelines define it. This page covers both halves and the activities that fall outside.
Who can claim
Companies within the charge to UK Corporation Tax that carry out qualifying R&D. The merged scheme is open to companies of any size. ERIS is for loss-making SMEs that meet the R&D intensity condition. There is no registration and no approval: relief is claimed in the Company Tax Return and tested only if HMRC opens an enquiry, although a claim notification is needed in some cases and an additional information form with every claim.
Three points follow. The claimant is the company that carries on the trade to which the R&D relates and incurs the expenditure; relief is not available to individuals, partnerships or unincorporated bodies. The R&D must relate to a trade the company carries on, or intends to carry on and derive from the R&D. And since April 2024 the question of who is entitled to claim for contracted out work turns on who made the decision to undertake the R&D, which the subcontracting page explains.
What counts as R&D
A project qualifies if it seeks an advance in science or technology by resolving scientific or technological uncertainty. HMRC applies the government's guidelines on the meaning of R&D for tax purposes. The guidelines are short, and four of their definitions do most of the work.
| Term | What the guidelines say | What it does not mean |
|---|---|---|
| Advance in science or technology | An advance in overall knowledge or capability in a field of science or technology, not a company's own state of knowledge or capability alone | A new product, or a first for the company, that uses existing knowledge |
| Scientific or technological uncertainty | Exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field | Commercial, financial or project uncertainty; uncertainty the company has because it lacks staff who know the field |
| Competent professional | Someone with the knowledge, skills and experience of a professional working in the field, whose view decides what is readily deducible | An expert in a different field, or a generalist |
| Science and technology | The systematic study of the nature and behaviour of the physical and material universe, and the practical application of scientific principles and knowledge; from April 2023 this includes mathematics | The arts, humanities and social sciences, including economics |
Two further points matter in practice. The project is the unit of analysis: the activities that together directly contribute to resolving the uncertainty, from the start of work on the uncertainty to the point at which it is resolved or the work is stopped. And certain indirect activities, such as training, maintenance and administration to the extent they support the project, can be included as qualifying indirect activities.
Activities that do not qualify
| Outside R&D | Why | Where the line sits |
|---|---|---|
| Work that applies existing knowledge in a routine way | No uncertainty: readily deducible by a competent professional | Adapting a known method to a new product is not R&D unless the adaptation itself is uncertain |
| Commercial, aesthetic and design work | Not an advance in science or technology | Market research, styling, branding and user interface design sit outside, even within an R&D project |
| Production and distribution after the uncertainty is resolved | R&D has ended | A trial production run to resolve a process uncertainty is R&D; the production that follows is not |
| Work in the arts, humanities and social sciences | Not science or technology | Economics and management research are excluded |
| Contracted out R&D and externally provided workers outside the UK | Location restriction from April 2024 | Generally limited to work carried out in the UK, with narrow exceptions |
Where the work is done
For accounting periods beginning on or after 1 April 2024, relief for contracted out R&D and externally provided workers is generally limited to work carried out in the UK. The company's own staff costs are not subject to a location test: an employee of a UK company who works abroad can still be a qualifying cost, subject to the ordinary rules on staff costs. The exceptions cover work that must be done abroad because the conditions required for the R&D are not present in the UK, for geographical, environmental or social reasons or because of legal or regulatory requirements, and where it would be wholly unreasonable to replicate those conditions in the UK; cost or workforce availability are not acceptable reasons. The subcontracting and overseas costs page covers the detail.
Illustrative example
Illustrative example. Thornfield Composites, a hypothetical Sheffield manufacturer, runs three projects in its year to 31 March 2026. Project A develops a resin system that cures at a lower temperature than any available product while holding the required strength; the technical director records at the outset that no published formulation achieves it and the team tests nine candidates. Project B redesigns the packaging of an existing product to a new brand style. Project C has a Czech subcontractor develop a tooling method because the Czech firm is cheaper.
| Project | Advance and uncertainty | Other tests | Result |
|---|---|---|---|
| A: resin system | Advance in materials science; uncertainty not readily deducible by a competent professional | Carried out in the UK by the company's own staff | Qualifies |
| B: packaging restyle | Aesthetic and commercial; no scientific or technological uncertainty | Does not qualify | |
| C: tooling method in Czechia | May be R&D on its merits | Contracted out work outside the UK for reasons of cost | Cost does not qualify |
Related pages
Self-check questions
Answer each question, then open it to compare.
A company builds a new product using methods a competent professional in the field would regard as readily deducible. Is it R&D for tax purposes?
The project succeeded in a way nobody expected but was aimed at a commercial advance, not a scientific one. Does it qualify?
A subcontractor in Poland carries out part of the project. Can the cost be claimed under the merged scheme?
Official sources
Educational content only, not tax advice. See the disclaimer.