R&D Claims - 6 things you need to know

Overview 📘

The R&D tax relief system has evolved significantly in recent years, and several key changes now shape how businesses claim.

Whether you’re preparing your first submission or updating an existing process, here are six essential things every company should know.

1️⃣ Pre-Notification Form

From 1 April 2023, HMRC introduced a new Pre-Notification requirement.

This administrative step is designed to ensure that companies think about R&D tax relief early, not just at year end.

You must submit a Pre-Notification Form if:

• Your company has not made an R&D claim in the previous three accounting periods, and
• You want to claim for an accounting period starting on or after 1 April 2023.

You can file the form from the first day of your accounting period until six months after the year-end.

For example:

For a 31 March 2025 year end, the form can be submitted between 1 April 2024 and 30 September 2025.

💡 If you’ve made a claim in the last three years, you don’t need to complete this step, but it’s worth double-checking before submitting, as missing it will invalidate your claim.

2️⃣ The Merged Scheme

The Merged Scheme is now the main route for R&D tax relief and replaces both the SME and RDEC schemes.

It operates similarly to the previous RDEC model but applies to almost all claimants.

Key Features

• Benefit: Taxable credit of 20% of qualifying expenditure.
• Grant funding: No longer affects eligibility, you can now claim R&D relief even if your project received grant support.
• How it works: The credit can offset tax liabilities or be received as a cash payout.

Example:

If you spend £150,000 on qualifying R&D costs, you could receive a £24,300 benefit, assuming you pay the small profits rate.

3️⃣ Enhanced R&D Intensive Support (ERIS)

The ERIS scheme provides higher relief for loss-making SMEs that spend a significant proportion of their budget on R&D.

To qualify, your company must:

• Be loss-making before applying the enhanced deduction.
• Spend at least 30% of total expenditure on qualifying R&D (this threshold drops from 40% in April 2024).

Key Benefits

• Enhanced deduction: 86% of qualifying costs.
• Payable credit: Losses can be surrendered for a 14.5% tax credit.

Example:

If you spent £150,000 on qualifying costs, you could receive a cash payout of £40,455.

💡 Grants do not affect your eligibility under ERIS, making this especially valuable for funded startups and R&D-led SMEs.

4️⃣ Overseas Expenditure

From April 2024, overseas subcontractor and agency staff costs (known as Externally Provided Workers) will no longer qualify unless specific exceptions apply.

The general rule:

If the R&D work can be done in the UK, it must be done in the UK.

However, costs remain allowable if:

• The necessary conditions for R&D (e.g. specialist environments or materials) don’t exist in the UK.
• Those conditions exist overseas and it would be wholly unreasonable to replicate them here.

📍 Example:

R&D on tropical plant biology carried out abroad would qualify if the UK climate could not provide the required research conditions.

Commercial reasons such as cost or convenience do not meet the exemption test.

Also note:

If you pay an overseas agency for staff who actually work in the UK and pay UK tax, those costs remain eligible.

5️⃣ Clearer Guidance on Subcontracted R&D

HMRC has provided long-awaited clarity on who can make an R&D claim in subcontracting arrangements.

✅ The company that makes the conscious decision to carry out R&D, with the understanding and capability to oversee it, is the one entitled to claim.

This removes the previous uncertainty where both the client and subcontractor could potentially claim for the same work.

6️⃣ We’re Here to Help

At Barnes & Scott, we support innovative businesses across every stage of the R&D process — from initial project discussions to preparing and submitting robust R&D tax claims.

We can help you:

• Assess whether a project qualifies for R&D relief.
• Gather the right technical and financial evidence.
• Prepare compliant documentation for HMRC.

💬 Book a call with our R&D Tax Manager, Steph Watson:

📧 s.watson@barnesandscott.co.uk

🔗 Book a meeting with Steph

✅ Summary