R&D Tax Relief 2026: New HMRC Rules and How to Claim Successfully

We’re seeing more companies come to us after having their R&D tax relief claims questioned, returned, or rejected by HMRC. The landscape has changed significantly since the previous SME and RDEC regimes were replaced for accounting periods beginning on or after 1 April 2024. Compliance requirements have also tightened, meaning businesses need to pay closer attention to eligibility, supporting evidence and filing requirements.

The good news is that genuine innovation can still generate meaningful tax relief. However, companies now need to be more precise when documenting their R&D activities and identifying qualifying expenditure.

Key Takeaways:

• The merged RDEC scheme offers a 20% taxable expenditure credit on qualifying R&D spend. Loss-making R&D-intensive SMEs may instead qualify for Enhanced R&D Intensive Support (ERIS).
• HMRC received an estimated 46,950 R&D claims for 2023/24, a 26% decline from the previous year.
• The Additional Information Form (AIF) is mandatory and must be submitted before, or on the same day as, the Company Tax Return containing the R&D claim.
• A Claim Notification Form is required only for certain companies, including first-time claimants and some businesses without a sufficiently recent R&D claim.
• HMRC introduced a targeted Advance Assurance pilot in 2026 to provide eligible SMEs with greater certainty on specific complex or high-risk areas of a proposed claim.

What is R&D tax relief in 2026?

R&D tax relief is a government incentive that allows eligible UK companies to obtain Corporation Tax relief or an expenditure credit for qualifying research and development. For accounting periods beginning on or after 1 April 2024, the merged R&D expenditure credit scheme and Enhanced R&D Intensive Support form the current framework.

To qualify, a project must seek an advance in science or technology by attempting to resolve scientific or technological uncertainty. The advance must not be something that a competent professional in the relevant field could readily work out.

Work in the arts, humanities or social sciences does not qualify simply because it is innovative. However, companies operating in creative industries can still qualify where their projects involve genuine scientific or technological uncertainty. This distinction is particularly important for creative businesses undertaking technical R&D.

Scheme	Who can claim	Rate	Potential benefit
Merged RDEC	Companies with qualifying R&D expenditure	20% taxable expenditure credit	Approximately 15% to 16.2% net depending on Corporation Tax treatment
ERIS	Loss-making R&D-intensive SMEs meeting the intensity condition	86% additional deduction, producing 186% enhanced expenditure, with a 14.5% payable credit on surrenderable loss	Up to approximately 26.97% of qualifying expenditure where sufficient surrenderable loss is available

The merged RDEC credit is taxable and is dealt with through a series of statutory payment steps. Depending on the company’s tax position, it can offset Corporation Tax and other liabilities, with an amount potentially becoming payable after the relevant restrictions are applied.

How does the merged RDEC scheme work for your company?

The merged RDEC scheme provides a taxable expenditure credit equal to 20% of qualifying R&D expenditure.

For a company spending £100,000 on qualifying R&D, the gross credit would be £20,000. Because the credit is taxable, a company subject to Corporation Tax at 25% would generally retain a net benefit of approximately £15,000. At a 19% Corporation Tax rate, the equivalent net benefit would be approximately £16,200.

There is also a PAYE cap on the amount that can ultimately be paid to a company in an accounting period unless an exemption applies. Broadly, the cap is £20,000 plus 300% of the company’s relevant PAYE and National Insurance contribution liabilities for that period. For shorter accounting periods, the £20,000 element is proportionately reduced.

Qualifying expenditure can include staff costs, consumable materials, software, data and cloud computing costs, externally provided workers and certain payments to contractors, subject to the relevant conditions and restrictions.

These rules can be particularly important in technically complex industries such as M&E engineering, where development projects may involve qualifying design, testing and technical problem-solving.

Restrictions also apply to certain overseas contractor and externally provided worker costs.

Who qualifies for Enhanced R&D Intensive Support (ERIS)?

ERIS is available to loss-making SMEs whose qualifying R&D expenditure meets the R&D intensity condition.

For accounting periods beginning on or after 1 April 2024, qualifying R&D expenditure generally needs to represent at least 30% of the company’s relevant total expenditure, subject to the detailed rules, including the intensity-condition grace period.

A qualifying company can claim an additional deduction equal to 86% of its qualifying R&D expenditure. This means £100,000 of qualifying expenditure can produce enhanced expenditure of £186,000.

The payable credit is then calculated at 14.5% of the amount surrendered. The surrenderable loss is the lower of:

• the enhanced expenditure; or
• the company’s relevant trading loss after the additional R&D deduction.

Therefore, a loss-making R&D-intensive SME with £100,000 of qualifying expenditure and sufficient surrenderable losses could receive a maximum payable credit of approximately £26,970.

The actual benefit may be lower where the company’s available surrenderable loss is below £186,000.

A company that qualifies for ERIS can choose to claim under the merged RDEC scheme instead, but it cannot claim under both schemes for the same expenditure.

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What is the Additional Information Form and why does it matter?

The Additional Information Form is mandatory for R&D claims and must be submitted before, or on the same day as, the Company Tax Return containing the claim.

Where the AIF and CT600 are filed on the same day, the AIF should be submitted first. Filing the Company Tax Return before completing this requirement can result in the R&D claim being removed.

The AIF requires detailed information including:

• the company’s UTR, employer PAYE reference and VAT registration details where applicable
• details of the main senior internal person responsible for the R&D claim
• details of agents involved in preparing or advising on the claim
• the relevant accounting period
• qualifying expenditure details
• project-by-project information about the R&D activities
• explanations of the scientific or technological advances and uncertainties involved

Companies should make sure the accounting period information matches the Company Tax Return exactly.

A separate Claim Notification Form may also be required for accounting periods beginning on or after 1 April 2023. However, this requirement does not apply to every company.

It generally applies to first-time R&D claimants and companies whose previous claim falls outside the relevant three-year look-back period. Where notification is required, the claim notification period generally ends six months after the end of the relevant period of account.

Missing a required notification deadline can make the subsequent R&D claim invalid, so businesses should establish whether the requirement applies before filing.

How likely is an HMRC enquiry into my R&D claim?

HMRC has increased compliance activity around R&D tax relief significantly in recent years. This includes additional compliance staff and specialist work aimed at tackling error and abuse.

However, there is no single current published enquiry percentage that can reliably predict whether an individual R&D claim will be investigated.

What the latest figures clearly demonstrate is a substantial decline in claim volumes. The September 2025 R&D tax relief statistics estimate that there were 46,950 claims for 2023/24, down 26% from the previous year.

SME scheme claims declined more sharply, falling by approximately 31%.

Metric	2023/24
Total R&D claims	46,950
SME scheme claims	36,885
RDEC claims	10,065
Total relief claimed	£7.6bn
Change in total claims	-26%
Change in SME claims	-31%

The total amount of relief claimed remained substantial at approximately £7.6 billion, only around 2% lower than the previous year’s estimate.

The reduction in smaller-company claims reflects the wider compliance and procedural changes affecting businesses across the country. Similar pressures have been seen among SMEs dealing with falling R&D tax relief claim volumes.

For businesses, the practical lesson is straightforward: prepare every claim on the assumption that HMRC may ask for supporting evidence.

What penalties apply if HMRC rejects my R&D claim?

An HMRC enquiry or rejected claim does not automatically mean that a penalty will apply. Penalties generally depend on whether an inaccuracy caused potential lost revenue and the behaviour that led to it.

For standard onshore inaccuracies, maximum penalties can include:

• Careless inaccuracies: up to 30% of the potential lost revenue
• Deliberate but not concealed inaccuracies: up to 70%
• Deliberate and concealed inaccuracies: up to 100%

The actual percentage can be reduced depending on factors including disclosure and cooperation.

Late payment interest can also apply where additional Corporation Tax becomes payable. The current HMRC late payment interest rate is 7.75% per annum, effective from 9 January 2026.

For example, if an inaccurate R&D claim causes £50,000 of potential lost revenue, a careless inaccuracy could carry a maximum standard penalty of £15,000. A deliberate but not concealed inaccuracy could carry a maximum penalty of £35,000, while a deliberate and concealed inaccuracy could reach £50,000.

Actual penalties may be lower depending on the circumstances and the quality of disclosure.

A further development in 2026 is a proposed criminal offence relating to reckless untrue statements or declarations involving direct tax. The consultation closed on 16 August 2026. The proposal is not currently law, so companies should not treat the potential criminal sanction as an existing penalty.

What is the new R&D Advance Assurance pilot?

HMRC launched a targeted R&D Advance Assurance pilot in May 2026 for eligible SMEs.

Unlike full-claim Advance Assurance, the targeted pilot does not amount to approval of an entire R&D claim. Instead, eligible companies can seek greater certainty on specific complex or high-risk areas before filing.

This can be useful where a company faces uncertainty over issues such as whether particular activity qualifies as R&D, overseas expenditure, contracted-out R&D or the PAYE cap.

A separate full-claim Advance Assurance service also remains available to qualifying SMEs making their first R&D tax relief claim.

Advance Assurance does not replace the actual R&D claim or the other filing requirements. It gives eligible businesses greater clarity before the claim is submitted.

How can UK companies strengthen their R&D claim?

Strengthening an R&D claim begins with documenting the scientific or technological uncertainty the project sought to resolve, rather than simply compiling costs at the end of the accounting period.

A strong technical explanation should make clear:

• the existing level of science or technology
• the advance the project sought to achieve
• the scientific or technological uncertainty encountered
• why that uncertainty could not readily be resolved by a competent professional
• how the project attempted to overcome the uncertainty

Practical steps include:

• Keep contemporaneous technical records such as project plans, experiment logs, design iterations and test results.
• Complete the AIF using specific project-level explanations rather than generic descriptions.
• Check whether a Claim Notification Form is required and submit it within the relevant deadline where necessary.
• Identify the senior internal person responsible for the claim.
• Disclose the agents involved where required.
• Separate qualifying R&D expenditure clearly from routine business activity.
• Review contractor and overseas expenditure carefully before including it.

Strong technical evidence is particularly important in sectors where innovative commercial work and qualifying R&D can overlap. For example, motion graphics studios developing technically challenging production methods need to distinguish ordinary creative work from projects involving genuine technological uncertainty.

The same distinction matters when developing AI security systems that involve genuine technical challenges or undertaking innovation within wearable technology, smart textiles and sensor development.

Good documentation does not guarantee that HMRC will not open an enquiry, but it puts the company in a stronger position to explain and support the basis of its claim.

Frequently Asked Questions

Can I still claim R&D tax relief if my company is profitable?

Yes. Eligible profitable companies can generally claim under the merged RDEC scheme for accounting periods beginning on or after 1 April 2024.

The scheme provides a taxable expenditure credit equal to 20% of qualifying expenditure. The credit passes through statutory payment steps and can offset Corporation Tax or other liabilities, with an amount potentially becoming payable depending on the company’s circumstances.

Loss-making R&D-intensive SMEs may instead qualify for ERIS where they satisfy the relevant conditions.

How much does it cost to use an accountant for an R&D claim?

The cost varies between advisers and depends on the size and complexity of the claim.

Advisers may use fixed fees, hourly rates, contingent fees or a combination of different fee structures. Businesses should understand exactly what the quoted fee covers, including eligibility assessment, technical documentation, preparation of the AIF, tax calculations and support if HMRC later opens an enquiry.

Price should therefore be considered alongside the adviser’s technical expertise, sector experience and approach to compliance.

What happens if I miss the Claim Notification Form deadline?

First establish whether your company was actually required to submit a Claim Notification Form.

Not every claimant needs to complete one. The requirement generally applies to first-time claimants and certain companies without a sufficiently recent qualifying R&D claim.

If notification was required and the deadline has passed, the subsequent R&D claim may be invalid for that accounting period. Businesses should therefore review their previous claim history and obtain advice before assuming either that notification is required or that relief has been lost.

Does software development qualify for R&D tax relief?

Software development can qualify where a project seeks an advance in technology and involves technological uncertainty that a competent professional could not readily resolve.

Examples may include developing new algorithms, overcoming significant performance constraints or creating technically novel systems where existing solutions cannot achieve the required outcome.

Routine website development, standard app configuration or the implementation of off-the-shelf software does not automatically qualify.

What is the difference between the old SME scheme and ERIS?

The previous SME scheme changed over time, so one historic rate should not be applied to every old SME claim.

Before the April 2023 changes, the SME scheme generally provided a 130% additional deduction, producing total enhanced expenditure of 230%, alongside a 14.5% payable credit rate on qualifying surrenderable losses.

The rules changed for expenditure incurred from April 2023, including enhanced support for qualifying R&D-intensive SMEs.

For accounting periods beginning on or after 1 April 2024, ERIS provides qualifying loss-making R&D-intensive SMEs with an 86% additional deduction, producing enhanced expenditure of 186%, and a payable credit equal to 14.5% of the surrenderable loss.

Companies that do not qualify for ERIS generally use the merged RDEC scheme where otherwise eligible.

Can I claim R&D tax relief for work done overseas?

Overseas contractor and externally provided worker expenditure is more restricted under the current merged scheme and ERIS rules.

In general, expenditure relating to R&D activity undertaken outside the UK may be excluded. Limited exceptions can apply where conditions necessary for the R&D are not present in the UK, are present overseas and it would be wholly unreasonable to replicate those conditions in the UK.

Relevant circumstances may include particular geographical, environmental or regulatory requirements. Lower labour costs or greater availability of overseas workers alone are not sufficient.

Special rules may also apply to certain Northern Ireland companies claiming ERIS.

Businesses using overseas developers, engineers or specialist contractors should therefore review the location and contractual arrangements carefully before including the expenditure.

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How Apex Accountants Can Help

If your company is investing in innovation, whether through new software, engineering solutions, digital systems or technically challenging products, R&D tax relief can provide valuable support where the eligibility requirements are met.

Apex Accountants supports research and development projects across a wide range of industries, helping businesses identify qualifying activity, prepare technical evidence, calculate eligible expenditure and complete the required documentation.

Our R&D tax team can support you with:

• assessing whether projects meet the scientific or technological advance test
• identifying qualifying expenditure
• preparing the Additional Information Form
• checking whether Claim Notification is required
• calculating relief under the merged RDEC scheme or ERIS
• reviewing contractor and overseas expenditure
• supporting responses where HMRC opens an enquiry
• assessing whether Advance Assurance may be appropriate

The rules have become more detailed, but eligible businesses can still access valuable relief where claims are carefully prepared and properly supported.

Book a free consultation to discuss your R&D activities with our team. We can review your projects, explain the relevant relief route and outline the compliance steps needed to prepare a robust claim.