HMRC issues new R&D tax relief guidance: does your business qualify

HMRC R&D tax relief guidance: is your business eligible to claim?

HMRC has published new guidance to help businesses determine whether they may be eligible for Research and Development (R&D) tax relief. The new material provides a high-level overview of the relief, outlines some of the key qualifying criteria and signposts businesses to more detailed guidance.

While the new promotional material does not change the underlying rules, it is notable because HMRC has not actively promoted R&D tax relief in this way for nearly 10 years. In recent years, much of the focus has instead been on tackling error and fraud, introducing additional compliance requirements and increasing scrutiny of claims.

Alongside the publication of this guidance, HMRC is undertaking research to better understand the end-to-end taxpayer journey for R&D claims. Together, these developments may indicate a more balanced approach to supporting legitimate claimants while maintaining compliance activity.

What qualifies for R&D tax relief?

HMRC’s guidance highlights that R&D tax relief is an important government incentive intended to support businesses investing in innovation. It also reminds businesses that projects do not need to be commercially successful to qualify for relief.

Many businesses assume that R&D tax relief is only available to companies undertaking scientific research in laboratories. In reality, qualifying activities can arise across a wide range of sectors, including manufacturing, engineering, technology, construction, agriculture and life sciences.

Broadly, a project must seek to achieve an advance in overall knowledge or capability in a field of science or technology. In seeking to achieve the advance, the company must also attempt to resolve scientific or technological uncertainty. Distinguishing between genuine technological advancement and broader commercial innovation can be one of the key challenges when assessing eligibility.

Our guide to R&D tax relief explains the schemes available and the changes introduced in recent years.

R&D tax relief schemes explained: merged scheme vs ERIS

The new HMRC guidance refers to the Research and Development Expenditure Credit and the Enhanced R&D Intensive Support (ERIS) regime.

However, determining which regime applies may also depend on when the expenditure was incurred.

For accounting periods beginning on or after 1 April 2024, most companies now claim under the R&D merged scheme, which replaced the previous scheme for the small and medium-sized enterprises (SMEs) and Research and Expenditure Development Credit (RDEC) scheme. Loss-making R&D-intensive SMEs may instead qualify for Enhanced R&D intensive support (ERIS), which can provide a more favourable level of relief where the relevant conditions are met.

These regimes operate differently and contain detailed provisions relating to subcontracted R&D, overseas expenditure and the calculation of relief. Our guides to the R&D merged scheme and Enhanced R&D Intensive Support (ERIS) consider the rules in more detail.

HMRC’s R&D tax relief eligibility checklist: three key questions

HMRC’s guidance encourages businesses to consider three key questions when assessing whether they may be eligible to claim.

Does the project include qualifying R&D activities?

The starting point is determining whether the project includes activities that qualify as R&D for tax purposes. HMRC has published an interactive tool to help businesses consider this question.

Has the company incurred qualifying R&D expenditure?

Businesses must also identify expenditure directly attributable to qualifying R&D activities or qualifying indirect activities. Depending on the circumstances, qualifying costs may include staff costs, software costs, subcontracted activities, externally provided workers, consumables, cloud computing costs and data licence costs.

Detailed guidance on qualifying expenditure is available in our articles on R&D tax relief, the R&D merged scheme and Enhanced R&D intensive support (ERIS), including some of the more complex rules affecting subcontracted R&D, overseas expenditure and R&D-intensive businesses.

Which accounting period and relief regime apply?

The rules differ depending on when expenditure was incurred. HMRC’s guidance notes that different reliefs may apply to accounting periods before and after 1 April 2024.

As a result, businesses should take care to identify the correct regime before preparing a claim, particularly where claims relate to multiple accounting periods.

R&D tax relief claims: HMRC compliance rules and filing requirements

The guidance also highlights some of the compliance obligations that businesses need to consider before making a claim.

In particular, HMRC reminds companies that:

• Advance assurance may be available from HMRC in some circumstances
• Companies claiming for the first time or the first time in three years may need to submit a claim notification form before making a claim
• An additional information form must be submitted before filing a Company Tax Return containing an R&D claim.

These requirements have become an important part of the claims process in recent years. Businesses considering a claim should ensure they fully understand the notification requirements and filing obligations.

Our guide to R&D tax relief explains these compliance requirements in more detail, including claim notification, the Additional Information Form and the deadlines that apply.

Although the publication promotes the claiming of R&D tax reliefs, R&D enquiries remain a significant feature of the compliance landscape. Robust technical analysis and clear supporting documentation are essential.

What HMRC’s new guidance means for R&D tax relief claims

It would be premature to conclude that HMRC has fundamentally changed its approach to R&D tax relief compliance. We see businesses continuing to encounter detailed enquiries and scrutiny of claims.

Nevertheless, the publication encourages businesses to consider whether they may be eligible to claim.

Given it has been many years since HMRC last produced promotional material of this nature, the guidance may represent a welcome signal that supporting genuine claimants is once again becoming a more visible part of HMRC’s R&D strategy.

For businesses undertaking innovative work, it provides a timely reminder to review whether relief may be available and to revisit projects that may not previously have been considered for a claim.

R&D tax relief support: how Saffery can help your business claim

The R&D tax relief rules have changed significantly in recent years, with the introduction of the merged scheme, ERIS and additional compliance requirements.

Our specialist team can help businesses:

• Identify qualifying R&D projects
• Determine which relief regime applies
• Calculate eligible expenditure
• Prepare robust claim submissions
• Review historic claims
• Respond to HMRC enquiries

Having advised companies across a wide range of sectors, we work with businesses to ensure that claims are both maximised and robust.

If you would like to discuss whether your business could qualify for R&D tax relief, please speak to your usual Saffery contact or get in touch with Rachel Chappell or Ollie Bull.