R&D Tax Credits Explained

Research and development (R&D) tax credits reward UK companies for investing in innovation. They are incredibly valuable as a government tax relief.

Companies that are eligible for this are ones that spend money on processes or services, enhancing existing services, or ones that spend money developing new projects. They are eligible for a cash payment and/or corporation tax reduction.

R&D tax credit rates work out to up to 33p for every £1 of qualifying expenditure, with two uses – either as an alternative option to innovation grants for research, or they are used in conjunction with them.


What Counts as R&D?

HMRC R&D requirements are quite broad, for tax reasons. If a company is risk taking and attempting to ‘resolve scientific or technological uncertainties’ then they may be carrying out a qualifying activity. This includes:

  • Creating new products, processes or services.
  • Changing or modifying an existing product, process or service.

This means that if you’re not sure your project is scientifically or technologically possible, or you don’t know how to achieve it in practice, you could be resolving uncertainties and therefore qualify for R&D tax credits.

R&D doesn’t need to have been successful to qualify within the accepted HMRC research and development definition, it can also be included for clients as well as your own projects.