If your small company spends money developing new products, processes, or services, you may be entitled to R&D tax relief — one of the most valuable Corporation Tax reliefs available. But the rules changed significantly from 1 April 2024, and many directors are confused about what they can claim and how to report it.
Here's a clear guide to the merged R&D scheme for SMEs and how it flows into your CT600.
What changed from April 2024?
Before April 2024, there were two separate R&D schemes:
- SME R&D Relief — an enhanced deduction of 130% on top of your actual spend (so you deducted 230% in total)
- RDEC (R&D Expenditure Credit) — a taxable above-the-line credit at 20%, mainly for large companies
From 1 April 2024, these merged into a single scheme. The key rates are:
| Feature | Merged scheme (from April 2024) |
|---|---|
| Deduction rate | 86% enhanced deduction (so 186% total) |
| Above-the-line credit | 20% RDEC-style credit |
| R&D-intensive SMEs | Enhanced 27% payable credit (if R&D spend is 30%+ of total expenditure) |
For most small companies, you now get a 186% total deduction — your actual R&D spend (100%) plus an 86% enhanced deduction. This replaces the old 230%.
What counts as qualifying R&D expenditure?
HMRC's definition of R&D for tax purposes follows the guidelines published by the Department for Science, Innovation and Technology (DSIT). Your project must seek an advance in science or technology — not just be new to your business.
Qualifying expenditure categories:
- Staff costs — salaries, employer NIC, and pension contributions for employees directly involved in R&D
- Subcontractor costs — payments to third parties for R&D work (now included in merged scheme at 65% for unconnected subcontractors)
- Consumables — materials, utilities, and software used up or transformed in the R&D process
- Software — licences used directly in R&D activities
- Cloud computing and data costs — new category from April 2023 onwards
Costs that don't qualify:
- Capital expenditure (claim capital allowances instead)
- Land or property costs
- Patent and trademark fees
- Work done to apply existing technology without seeking an advance
How to calculate the tax benefit
Example: SME with £100,000 R&D spend
Under the merged scheme (April 2024 onwards):
| Step | Amount |
|---|---|
| Actual R&D expenditure | £100,000 |
| Enhanced deduction (86%) | £86,000 |
| Total deduction against profits | £186,000 |
| Corporation Tax saving at 25% | £46,500 |
| Corporation Tax saving at 19% (small profits rate) | £35,340 |
If your company is loss-making, you can surrender the loss for a payable tax credit. Under the merged scheme, the standard payable credit rate is 10%. For R&D-intensive SMEs (where qualifying R&D expenditure is 30% or more of total expenditure), the payable credit rate is 14.5%.
Which CT600 boxes to complete
R&D relief is reported across several sections of your CT600:
Main CT600 form
- Box 530 — Total trading losses (if claiming loss relief)
- Box 535 — Trading losses carried forward
- Box 660 — R&D enhanced expenditure — enter the enhanced deduction amount (the extra 86%, not the full 186%)
CT600L — R&D supplementary page
You must submit the CT600L supplementary page alongside your CT600. This is mandatory for all R&D claims from April 2024. Key sections:
- Total amount of qualifying R&D expenditure by category (staff, subcontractors, consumables, etc.)
- Amount of enhanced deduction claimed
- RDEC credit amount (if applicable)
- Payable credit claimed (for loss-making companies)
Additional Information Form (AIF)
Since 8 August 2023, all R&D claims must include an Additional Information Form submitted to HMRC before filing the CT600. This must include:
- A description of each R&D project
- How each project sought an advance in science or technology
- Breakdown of costs by category
- Agent details (if a tax adviser prepared the claim)
Failure to submit the AIF before filing will result in your R&D claim being rejected.
Pre-notification requirement for new claimants
If your company has not claimed R&D relief in the previous three accounting periods, you must submit a claim notification form to HMRC. The deadline is 6 months after the end of the accounting period you're claiming for.
Miss this deadline and you cannot claim R&D relief for that period — no exceptions.
Common mistakes when claiming R&D relief
- Claiming for routine development — adapting existing technology isn't R&D; you must demonstrate technological uncertainty
- Forgetting the AIF — mandatory since August 2023, and claims are rejected without it
- Missing the pre-notification deadline — new claimants have only 6 months after the period end
- Including non-qualifying costs — capital items, rent, and admin overheads don't qualify
- Overclaiming subcontractor costs — only 65% of payments to unconnected subcontractors are qualifying spend under the merged scheme
Should you use an R&D specialist or claim yourself?
Many R&D advisory firms charge 15–30% of the tax saving as their fee. For straightforward claims (e.g., a software company with clear development projects), you may be able to prepare the claim yourself and save thousands.
The key is accurately identifying qualifying projects and expenditure. If your R&D is complex or your claim is large, specialist advice may be worthwhile — but always check their credentials and avoid firms that promise unrealistic savings.
Related articles
- Corporation Tax Reliefs: Complete List for UK Companies
- CT600 Box-by-Box Guide: Every Section Explained
- CT600 Supplementary Pages Guide
- Corporation Tax Allowable Expenses: Complete List
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Related: Patent Box relief (10% rate)