What Are R&D Tax Credits and How Do They Work in the UK?

R&D tax credits are a government-backed initiative designed to encourage innovation by providing financial relief to businesses that engage in research and development activities. Introduced in 2000, the scheme helps companies recover a percentage of their R&D expenditure, reducing tax liabilities or providing cash rebates.

However, navigating the claims process can be complex, and many businesses either miss out on eligible relief or face delays due to incorrect submissions. That’s where Claimly comes in.

At Claimly, we simplify the R&D tax claim process by partnering with vetted tax specialists who are experts in both technical and financial aspects of the claim. We ensure that businesses claim the maximum relief available while staying fully compliant with HMRC regulations.

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What Are R&D Tax Credits?

R&D tax credits allow businesses to claim back some of the money they have spent on innovation. These credits reward companies that develop new products, processes, or services—or enhance existing ones.

At Claimly, we work with businesses across multiple industries, including manufacturing, software development, engineering, and construction, to help them unlock their full entitlement.

There are two primary schemes under which companies can claim R&D tax credits:

1. The SME R&D Relief Scheme – for small and medium-sized enterprises (SMEs)
2. The Research and Development Expenditure Credit (RDEC) Scheme – for larger businesses and some grant-funded SMEs

Our expert consultants at Claimly determine which scheme is right for you and handle the entire claim process from start to finish.

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How Do R&D Tax Credits Work?

1. SME R&D Relief Scheme

The SME scheme is tailored for small and medium-sized businesses. To qualify, a company must:

• Have fewer than 500 employees
• Have a turnover of less than £100 million or a balance sheet total of less than £86 million

Under this scheme:

• Loss-making SMEs can claim up to 27% of their eligible R&D costs as a cash repayment.
• Profitable SMEs can reduce their corporation tax liability by up to 21.5%.
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2. Research and Development Expenditure Credit (RDEC) Scheme

For larger businesses (and SMEs in some cases), the RDEC scheme provides a taxable credit worth 20% of qualifying R&D expenditure, which can be used to reduce Corporation Tax or claimed as a cash benefit.

Our team at Claimly ensures that your claim is handled correctly, whether you fall under the SME scheme or RDEC scheme, so you don’t miss out on valuable relief.

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What Counts as R&D for Tax Relief?

To qualify for R&D tax credits, businesses must undertake projects that seek to make scientific or technological advancements. These projects should attempt to resolve uncertainty that could not easily be solved by professionals in the field.

Qualifying R&D Activities:

• Developing new products, processes, or services
• Improving existing technologies
• Creating or modifying software
• Experimenting with new materials or techniques
• Overcoming scientific or technical uncertainties
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Qualifying R&D Expenditure:

The following costs are eligible for R&D tax relief:

• Staff Costs – Salaries, employer NI, pensions, and bonuses for those working directly on R&D.
• Subcontractor Costs – Payments to third-party contractors involved in R&D work (only partial relief for SMEs).
• Materials & Consumables – Costs of materials used in R&D, including prototypes and lab supplies.
• Software Costs – Software used for R&D purposes.
• Utilities – Power, water, and fuel used in R&D activities.

At Claimly, we conduct a thorough review of your R&D activities to ensure you claim every eligible cost.

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Why Choose Claimly for Your R&D Tax Claim?

Many businesses struggle with R&D tax claims due to a lack of expertise, time constraints, or fear of HMRC audits. That’s why working with Claimly makes all the difference.

✔ Expert Guidance – Our vetted tax specialists have deep expertise in both technical R&D analysis and financial tax compliance.

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✔ Maximised Claims – We ensure you claim every eligible expense, increasing your refund or tax savings.

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✔ Hassle-Free Process – We handle everything, from identifying qualifying R&D projects to submitting your claim.

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✔ HMRC Compliance – We ensure that your claim is fully compliant, reducing audit risk.

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✔ Fast & Efficient – We streamline the claim process so you can receive your benefit quickly.