By Maz Davis | 10 June, 2025
Why R&D Tax Relief Still Matters and Why Businesses Should Keep Exploring It
Research and Development (R&D) has long been a key driver of business growth and economic advancement in the UK. Whether it is developing new products, enhancing services, or solving technical challenges, innovation allows businesses to stay competitive and adapt to changing markets. The UK’s R&D tax relief regime exists to support this innovation by offering valuable financial incentives to companies investing in advancement.
In recent years, however, changes to the scheme and a sharper compliance environment have left some businesses uncertain about how to engage with R&D tax relief. Despite this shift, companies undertaking eligible activities should not overlook the significant benefits still available.
Understanding the New R&D Landscape
From 1st April 2024, the government introduced a merged R&D tax relief scheme, bringing together the Small and Medium Sized Enterprises (SME) and Research and Development Expenditure Credit (RDEC) schemes into a single, streamlined system. This change applies to accounting periods beginning on or after that date. The intention behind the merger is to improve consistency and fairness in how relief is granted.
Under the merged scheme, qualifying businesses can receive a 20 percent expenditure credit on eligible R&D costs. This credit is taxable, and the net benefit will depend on the company’s applicable corporation tax rate. For many businesses, this still represents a meaningful opportunity to recover a portion of their innovation spend.
In addition, loss-making R&D-intensive SMEs may be able to access support through the Enhanced Relief for Intensive Support (ERIS), which offers a non-taxable credit of up to 14.5 percent, subject to meeting the qualifying thresholds. A one-year grace period has been introduced for businesses that temporarily fall below the intensity criteria.
What Qualifies as R&D?
To qualify for relief, companies must be seeking to make an advance in science or technology through the resolution of scientific or technological uncertainty. This could involve developing new products, improving manufacturing processes, enhancing software systems, or other technical innovations.
The key test is whether the outcome of the work was not readily deducible to a competent professional in the field. HMRC expects claimants to follow a systematic approach, and to maintain records that support the nature of the work and its objectives.
Examples of eligible expenditure include staff costs, materials consumed during development, software used directly in R&D, data licences, and cloud computing services. Recent changes have introduced tighter rules around subcontracted work, externally provided workers, and overseas activities, so advice should be sought at an early stage when planning a claim.
A Shift in Approach: What It Means for Businesses
The more structured compliance environment has improved oversight of claims, but it has also introduced complexity. Some businesses may feel unsure about whether their projects qualify, or how to begin assembling the information needed to make a claim.
At Saul Fairholm, we understand these challenges and are here to support businesses that are considering whether they may be eligible. We work with clients to demystify the process, explain the latest HMRC criteria, and help them identify areas of innovation within their operations. Even businesses that have not previously claimed R&D relief may be undertaking work that meets the qualifying criteria.
Why It Is Still Worth Exploring
The financial benefit of a successful R&D claim can be substantial, offering a valuable source of reinvestment back into development and growth. More than that, engaging with the R&D regime encourages businesses to reflect on their innovation strategy, build better documentation practices, and stay competitive in their market.
The regime is not just about tax, it is about recognising and rewarding the time, risk, and investment required to move a business forward through technical advancement.
How We Can Help
Whether you are exploring R&D tax relief for the first time or simply want to understand if your recent projects might qualify, the team at Saul Fairholm is here to help. We can provide guidance on eligibility, documentation requirements, and the latest changes under the merged scheme. Where appropriate, we also work with specialist partners to ensure the technical aspects of a claim are thoroughly supported.
Our goal is to make the process accessible and manageable, giving you the confidence to explore this opportunity with clarity and compliance in mind.
Next Steps
If your business has undertaken innovative or technical work in the past year, or if you are planning future development, now is a good time to assess whether you could benefit from R&D tax relief. With the right advice and a clear understanding of the rules, claiming support for innovation can become a straightforward and rewarding part of your business strategy.
To find out more or to speak to one of our advisers, contact the tax team at Saul Fairholm today. We are ready to help you take the next step on your innovation journey.
