If your business builds software, develops products, improves processes or solves technical problems that don't have an obvious answer, there's a good chance you're doing R&D in HMRC's eyes.
And that means you could be leaving money on the table.
R&D tax relief is one of the most valuable incentives available to UK businesses, but it’s also one of the most misunderstood. Some companies don’t realise they qualify, others have been put off by headlines about HMRC crackdowns and plenty are still working off outdated advice from the old scheme.
Here’s what you actually need to know heading into the 2026/27 tax year.
There’s now one scheme, and it’s simpler than before
In the past, R&D relief was split into two separate schemes: the SME scheme and RDEC. From April 2024, those merged into a single scheme for most companies.
The merged scheme gives you a 20% gross credit on qualifying R&D expenditure. For profitable companies paying corporation tax at 25%, that works out at roughly 15% net. That’s a meaningful reduction in your tax bill.
If you haven’t claimed since the merger, it’s worth revisiting. The rules around what qualifies haven’t fundamentally changed, but the mechanics of how the relief flows through your tax computation have.
Worth knowing: You don’t need to be a tech company to qualify. If you’re overcoming genuine technical uncertainty, you’re in scope.
Loss-making R&D-intensive businesses get more
If your business is loss-making and heavily invested in development, there may be more support available.
There’s a separate enhanced scheme specifically for R&D-intensive SMEs, where qualifying R&D spend makes up at least 30% of total operating costs. This scheme can offer up to 27% back in cash.
For early-stage and scaling businesses burning through development spend before hitting profitability, this can be a genuine lifeline.
It’s important to note that the 30% threshold is based on total costs, not just R&D costs. If you’re close to the threshold, it’s worth modelling the numbers properly rather than assuming you don’t qualify.
Worth doing now: If you think this scheme could apply to your business, ask us to model whether you hit the R&D intensity threshold. The difference in cash back is substantial.
HMRC scrutiny is real, but shouldn’t put you off
Let’s address the elephant in the room: many businesses avoid claiming R&D tax relief because of HMRC’s reputation.
The truth is this: HMRC have been rejecting more claims, compliance around R&D has increased significantly over the past two years, and some businesses have had claims delayed or challenged.
But here’s the context: most of the rejected claims were poorly prepared, inflated, or submitted by claim factories with no real understanding of the business.
In short, HMRC isn’t trying to stop legitimate claims. They’re trying to weed out the bad ones.
If your claim is well documented, technically sound, and reflects genuine R&D activity, you should absolutely still be claiming. The key is getting the narrative right. HMRC wants to understand what technical challenge you were trying to solve, why the solution wasn’t readily available, and what you actually did to overcome it.
Worth doing now: If your last claim was prepared by a volume R&D provider or you’re not confident in the technical narrative, it’s worth having it reviewed before your next submission. A well-prepared claim is far less likely to be queried.
The Advance Assurance pilot could give you certainty
One of the more interesting developments for 2026 is HMRC’s Advance Assurance pilot for R&D claims.
With Advance Assurance, you submit details of your R&D activities to HMRC before filing your claim, and they give an indication of whether your activities qualify.
This is particularly useful for first-time claimants or businesses that have changed the nature of their R&D activity. It won’t suit everyone (there’s a time investment involved) but for companies that want certainty before committing to the process, it’s a welcome option.
Worth doing now: If you’ve been hesitant about claiming because you’re unsure whether your work qualifies, the advance assurance route could be exactly what you need. Talk to us about whether it makes sense for your situation.
Watch out for subcontractor and overseas costs
One area that still trips businesses up is subcontracted R&D work, particularly where it involves overseas contractors or developers.
Under the merged scheme, if you subcontract R&D activities overseas, those costs are generally excluded from your claim. There are limited exceptions (for example, where the work genuinely cannot be done in the UK due to geography, environment, or legal requirements), but the bar is high.
This matters for tech businesses using offshore development teams, or manufacturers working with overseas suppliers on product development. It doesn’t mean you can’t claim, but you need to be careful about which costs you include.
Worth doing now: Review your R&D supply chain. If a significant portion of your development work is done outside the UK, we can map out what’s claimable and what isn’t before you file.
You can claim for previous years too
R&D claims can be made up to two years after the end of the accounting period. So even if you’ve never claimed before, you could potentially access relief for the last two financial years.
For example, a business spending £200,000 a year on qualifying R&D could recover £60,000 or more in tax relief across two years.
If you’ve previously claimed R&D relief, it’s worth checking whether previous claims captured everything. We often find that businesses have under-claimed around staff costs, software, cloud computing, and consumables.
Worth doing now: If you’ve never claimed, or it’s been a while since your claim was properly reviewed, get in touch.
The bigger picture
R&D tax relief rates are stable heading into 2026/27, and successful claims can make a huge impact for businesses. But the bar for quality is higher than it used to be, and HMRC is paying closer attention.
That’s actually good news for businesses doing genuine innovation. It means less competition from weaker claims and a faster, smoother process for well-prepared ones.
The businesses that benefit most are the ones that treat R&D relief as part of their ongoing tax planning. If you’re investing in development, solving hard problems, or building something new, this relief exists for you.
Let’s have a conversation
Whether you’re a first-time claimant or you want a second opinion on an existing claim, we’re happy to talk it through. Get in touch to see what we can do for you.
