Why Your Business Should Be Claiming R&D Tax Credits
Over 60,000 UK companies claim R&D tax relief each year — but thousands more qualify and never apply. Here’s what you might be missing.
HMRC paid out £7.6 billion in R&D tax relief in the 2022/23 tax year. Despite that headline figure, SME claims fell by 31% following HMRC’s 2023 reforms — not because fewer companies were doing qualifying work, but because the compliance requirements increased and many businesses quietly decided the effort was no longer worth it. That represents a significant amount of money left unclaimed by companies that had a legitimate entitlement. If your business has been doing anything that looks like R&D and you have not yet made a claim, this article is for you.
The Financial Case
The numbers are straightforward. Under the current merged scheme, most UK companies receive a 20% above-the-line R&D Expenditure Credit (RDEC). On £200,000 of qualifying expenditure, that is a £40,000 gross credit — reducing your corporation tax bill by up to £30,000 net. For a growing software business with a team of five to ten engineers, qualifying expenditure in that range is not unusual.
For loss-making companies — particularly early-stage startups — the impact is even more direct. Under the Enhanced R&D Intensive Support (ERIS) scheme, eligible loss-making SMEs spending at least 30% of total expenditure on R&D can receive approximately 27p per £1 as a payable cash credit. That money lands in your bank account, regardless of whether you have paid any corporation tax. For a pre-revenue company burning cash on development, an R&D tax credit can meaningfully extend runway without any additional dilution or debt.
The key point is that this is not a grant application that competes with other applicants. It is a tax relief — your entitlement if you meet the criteria, funded by the government as a matter of policy. You are not asking for anything you have not already earned.
You Might Qualify Without Knowing It
One of the most consistent findings when businesses go through an eligibility assessment is that they underestimate how broad the definition of qualifying R&D actually is. HMRC’s threshold is not “Nobel Prize-level discovery”. It is work that seeks to advance science or technology by resolving an uncertainty that a competent professional in that field could not readily resolve from existing public knowledge.
In practice, that includes a much wider range of activity than most business owners realise:
- Software development — building systems where the technical approach was not obvious at the outset, where existing libraries or frameworks were insufficient, or where performance requirements pushed you beyond standard solutions. Writing a CRUD app does not qualify; designing a novel real-time inference system that had no obvious prior art almost certainly does.
- New products and processes — if you have developed something that did not previously exist in the market, and you encountered technical obstacles along the way, much of that development work is likely qualifying.
- Internal tools and infrastructure — if your engineering team built proprietary internal tooling to solve a problem for which no commercial solution was adequate, that work may qualify too.
- Failed projects — this surprises many people. If you attempted to solve a genuine technical problem and the project did not succeed, the costs incurred are still claimable. The relief is for the attempt, not the outcome.
If you have had engineers solving hard problems, you have almost certainly done some qualifying R&D. The question is whether you have documented it properly.
Your Competitors Are Already Claiming
In the technology sector especially, R&D tax relief is not a niche strategy known only to a handful of well-advised companies. It is routine. Venture-backed startups, growing SaaS businesses, digital agencies with product arms, and established tech firms all claim it as a matter of course. Many factor the expected R&D credit into their financial planning and cashflow projections.
If you are not claiming and your competitors are, they are effectively operating with a lower net cost of R&D than you are. Over several years, that compounds. On a £500,000 annual R&D spend, the difference between claiming and not claiming is £75,000–£135,000 per year. That is real competitive ground ceded for no reason.
The Cost of Not Claiming
Beyond the missed tax relief itself, there is a time limit that bites. R&D claims must be submitted within two years of the end of the accounting period to which they relate. If your company has been doing qualifying work for three years but has never claimed, you can still go back two years — but the earliest year is already gone. Every month you delay potentially closes a window permanently.
There is also a documentation decay problem. The technical detail required for a strong claim — what the uncertainty was, what approaches were tried, why they did or did not work — is far easier to reconstruct from records made at the time than from memory twelve or eighteen months later. The longer you wait to start, the harder the retrospective claim becomes.
Why Now Is the Right Time
For most of 2023 and into 2024, the R&D tax landscape was in flux. Rates were changing, two schemes were being merged into one, and the new Additional Information Form requirement was catching companies out. Many businesses understandably held off while the dust settled.
That period is now behind us. The merged scheme is established. The AIF requirements are clear. HMRC’s processing times have improved. The compliance expectations are well understood. For companies that have been waiting for stability before engaging with R&D claims, 2025 is the right moment to act.
Menlo makes the process fast and affordable — without the 15–25% consultant fees that have historically made smaller claims uneconomical. By pulling activity data directly from your source control, Menlo does the analytical heavy lifting, leaving your team to review and approve rather than build from scratch.