The old SME and RDEC schemes became one merged scheme for accounting periods beginning on or after 1 April 2024. Most businesses claiming R&D tax credits have now filed at least once under the new rules. Far fewer have gone back and checked whether their claim still reflects what they're entitled to.
How do R&D tax credits work under the merged scheme?
The merged scheme brought R&D relief under a single expenditure credit, set at 20% for accounting periods beginning on or after 1 April 2024. The real net benefit depends on your tax position, because the credit is taxable.
Loss-making, R&D-intensive SMEs can claim more under the ERIS route. To qualify, R&D intensity must be 30% or more and the company must be making a trading loss before the extra deduction. It then gets an 86% additional deduction (186% in total) and a 14.5% payable credit, which works out at up to roughly 27% of qualifying spend.
Overseas costs are also restricted. Work done outside the UK generally doesn't qualify unless there's a narrow exception, such as conditions that can't reasonably be found in the UK. Lower cost isn't one of them.
Why is it worth revisiting your R&D claim now?
A claim that was set up under the old rules and refiled each year can drift away from the current ones. Three areas are worth a second look: how close you sit to the 30% intensity line, whether any contractor or externally provided worker costs are caught by the overseas rules, and whether your paperwork meets the process requirements.
None of this is about being aggressive. It's about making sure this year's claim reflects this year's rules.
What should founders check before filing?
- Check your R&D intensity ratio properly, not roughly. The 30% threshold is a hard line, and it's worth knowing which side of it you sit on before you file.
- Review where your R&D work is actually being carried out. Contractor and externally provided worker payments are subject to the overseas restrictions unless an exception applies.
- Check your paperwork as well as your numbers. Claims need an additional information form, and a company that hasn't claimed in the last three years must notify HMRC within six months of the end of the accounting period. HMRC says a claim missing either requirement is invalid.
- If you're close to the intensity threshold, have the conversation before year-end, not after your accounts are drafted.
Frequently asked questions
What is the merged R&D scheme?
A single R&D expenditure credit scheme for accounting periods beginning on or after 1 April 2024. The credit rate is 20%, and the net benefit depends on the company's tax position.
What is the R&D intensive scheme (ERIS)?
An enhanced route for loss-making SMEs whose R&D intensity is 30% or more. It gives a 186% deduction and a 14.5% payable credit, worth up to roughly 27% of qualifying spend.
Do I have to notify HMRC before making an R&D claim?
Often, yes. A claim notification is due within six months of the end of the accounting period, unless an exception applies, for example if you made an R&D claim in the previous three years.
Does overseas R&D still qualify?
Generally not. Overseas contractor and externally provided worker costs are restricted unless an exception applies, such as conditions that can't reasonably be found in the UK. Lower cost doesn't count.
A merged scheme doesn't mean a smaller one. For R&D-intensive businesses in particular, there is real relief available that a lot of claims may not be capturing.
If it's been a year or more since your R&D claim was actually reviewed rather than repeated, that's worth a proper look before your next filing.
