Research and Development (R&D) tax relief is one of the most valuable tax incentives available to UK companies — but most small companies don't claim it. If your company develops new products, processes, or services, you could be leaving thousands of pounds on the table.

What Is R&D Tax Relief?

R&D tax relief lets your company reduce its Corporation Tax bill (or get a cash payment) when it spends money on qualifying research and development activities.

There are two schemes:

Scheme	For	Benefit
SME R&D Relief	Companies with <500 staff, <€100m turnover, <€86m assets	Enhanced deduction of 86% (from April 2023) + payable credit for losses
RDEC	Large companies (or SMEs with subsidised R&D)	Above-the-line credit of 20% (from April 2023)

Most small limited companies use the SME scheme.

What Qualifies as R&D?

Your project qualifies if it seeks to achieve an advance in science or technology by resolving scientific or technological uncertainty.

In plain English: if you're trying to do something that isn't straightforward and you don't know if or how it can be done, it might qualify.

Examples That Often Qualify

Software development: Building new algorithms, AI/ML models, integrating complex systems in novel ways
Engineering: Designing new products, improving manufacturing processes
Food & drink: Developing new formulations, shelf-life extension
Construction: New building techniques, materials testing
Life sciences: Drug development, medical devices, clinical trials

Examples That Usually Don't Qualify

Using existing technology in a standard way
Cosmetic changes or routine updates
Market research or commercial innovation (without technical uncertainty)
Simply buying and implementing off-the-shelf software

How Much Can You Save?

SME Scheme Calculation (from April 2023)

If your company is profitable:

Take your qualifying R&D spend (e.g., £100,000)
Apply the 86% enhancement: £100,000 × 86% = £86,000
Total deduction: £100,000 + £86,000 = £186,000
Tax saving at 25%: £186,000 × 25% = £46,500 (vs £25,000 without R&D relief)

Additional saving: £21,500 on £100,000 of R&D spend.

If your company is loss-making:

You can surrender losses for a payable tax credit:

Enhanced loss: £186,000
Credit rate: 10%
Cash payment from HMRC: up to £18,600

What Costs Qualify?

Staff costs — salaries, NI, pension contributions of staff directly involved in R&D
Subcontractor costs — 65% of payments to subcontractors for R&D work
Consumables — materials, utilities used in R&D
Software — licences for software used directly in R&D
Clinical trial volunteers — payments to participants

Staff costs typically make up 60-70% of most R&D claims.

Which CT600 Boxes to Complete

Box	Description
Box 530	Enhanced R&D expenditure (total qualifying spend × 186%)
Box 535	R&D enhanced expenditure — SME scheme
Box 540	Creative industry enhanced expenditure
Box 660-695	Supplementary pages CT600L for detailed R&D claim

You'll also need to complete the CT600L supplementary page which breaks down your R&D expenditure by category.

How to Claim

Step 1: Identify Qualifying Projects

Review your company's activities and identify projects that involved technological uncertainty. Keep contemporaneous records — don't wait until year-end.

Step 2: Calculate Qualifying Costs

Add up the staff costs, subcontractor costs, consumables, and software for each qualifying project. Apply the relevant percentages (e.g., 65% for subcontractors).

Step 3: Write a Technical Narrative

HMRC requires a written description of:

What advance in science/technology you sought
What uncertainties existed
How you tried to overcome them
What the outcome was (success or failure — both qualify)

Step 4: Complete Your CT600

Include the R&D figures on your CT600 return and submit the CT600L supplementary page.

Step 5: Submit Additional Information Form

Since April 2023, you must also submit an Additional Information Form (AIF) to HMRC before or alongside your CT600. This includes:

A summary of each R&D project
The costs claimed per project
Agent details (if using one)

Important Changes from April 2024

The R&D landscape has changed significantly:

Merged scheme (RDEC): From April 2024, the SME and RDEC schemes are being merged into a single scheme for accounting periods starting on or after 1 April 2024
Enhanced R&D Intensive Support (ERIS): Loss-making R&D-intensive SMEs (R&D spend >30% of total expenditure) get a higher payable credit rate of 14.5%
Pre-notification: First-time claimants (or those who haven't claimed in 3+ years) must notify HMRC within 6 months of the end of the period

Common Mistakes

Not claiming at all — the biggest mistake. Many directors think R&D relief is only for labs and scientists
Claiming too late — R&D claims must be made within 2 years of the end of the accounting period
Not keeping records — HMRC can enquire into R&D claims for up to 6 years
Overclaiming — including routine work or commercially-driven activities
Missing the pre-notification — first-time claimants must notify HMRC in advance

Should You Use a Specialist?

R&D tax relief claims can be complex, and HMRC scrutinises them closely. For straightforward claims (small software companies with clear R&D projects), you can self-claim on your CT600.

For larger or more complex claims, consider using an R&D tax specialist. They typically charge 15-25% of the successful claim value — paid only if the claim succeeds.

File Your CT600 with Taxpipe

Whether you're claiming R&D relief or filing a straightforward return, Taxpipe makes CT600 filing simple. Enter your company details, answer plain-English questions, and we handle the rest — for just £59 per return.

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Related: Patent Box relief (10% rate)

Related: creative industry tax reliefs

R&D Tax Relief for Small Companies: What to Claim on Your CT600