R&D tax relief explained - UK, 2024 onwards
The UK reduces the cost of solving genuinely hard technical problems. For software teams, most of that spend is engineers' salaries. Here's how the regime works after the 2024 reforms - and why, today, evidence is what decides the outcome.
What the relief is - and who it’s for
R&D tax relief lets UK companies recover part of what they spend resolving scientific or technological uncertainty - work where the answer wasn’t readily available to a competent professional. It applies to limited companies within UK Corporation Tax. Software, ML and algorithmic work routinely qualifies (pure mathematics has been in scope since April 2023) - provided you can evidence the advance and the uncertainty.
The post-April-2024 landscape
For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes are replaced by two routes. Which one applies to you is your accountant’s determination - Aven doesn’t select your scheme.
The merged scheme
An above-the-line R&D expenditure credit with a headline rate of 20% of qualifying expenditure. The credit is itself taxable, so the net cash benefit works out lower - roughly 15–16.2% depending on your tax position. (The 20% is HMRC’s published rate; the net range is arithmetic, not a separate published figure.)
ERIS (R&D-intensive SMEs)
Enhanced R&D Intensive Support is for loss-making SMEs whose qualifying R&D is at least 30% of total expenditure. It gives an extra 86% deduction (186% total) and a payable credit of up to 14.5% of the surrenderable loss - HMRC frames it as “up to £27 per £100” of R&D, a ceiling rather than a guarantee.
The compliance changes that make evidence matter
The Additional Information Form
Mandatory for all claims submitted on or after 8 August 2023 - without it the claim is invalid. It requires a project-by-project technical write-up (baseline, advance, uncertainty, approach), the cost breakdown, and a named responsible officer.
The claim-notification deadline
Many companies must now pre-notify HMRC within a window that runs from the first day of the period to six months after it ends. Miss it and the claim is forfeited - which is why Aven checks your deadline before anything else, and won’t take payment for a claim whose window has closed.
Qualifying costs & the main restrictions
The categories below qualify when apportioned to R&D. Two restrictions catch software teams out: only 65% of unconnected subcontractor and externally-provided-worker payments qualify, and from April 2024 contractor/EPW costs are generally excluded where the R&D takes place overseas.
Staff costs
Salaries, employer NIC and pension for staff doing or directly supporting R&D, apportioned.
Externally-provided workers
Agency/contract staff - only 65% of the payment qualifies if unconnected.
Subcontractors
Only 65% of an unconnected subcontractor payment qualifies; connected parties use actual cost.
Consumables
Materials and utilities consumed in the R&D process, apportioned.
Software, data & cloud
Software licences, and data-licence and cloud-computing costs (qualifying from 1 April 2023).
What an HMRC enquiry actually asks for
If HMRC opens an enquiry, it requests a technical report covering the advance, uncertainty and approach; a cost breakdown by project and category; staff-time apportionment; a competent-professional statement; and - crucially - contemporaneous records: project plans, technical notes, test logs, version-control history and ticket threads. The quality of your first response matters most. That contemporaneous trail is precisely what Aven assembles while it’s still fresh.
Aven assembles R&D evidence packs for accountant review; Aven Reviewed adds expert review. Aven does not file with HMRC, determine your liability, select your scheme (merged vs ERIS), sequence loss relief, or guarantee any amount - those are your accountant or R&D tax firm’s responsibility. Figures are indicative and conservative. Nothing here is tax advice. UK only.
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