What is R&D tax relief?
R&D tax relief allows companies to claim a deduction (or in some cases a payable credit) against their Corporation Tax bill for qualifying expenditure on research and development activities. For small and medium-sized companies, the current scheme provides an enhanced deduction on qualifying R&D costs, meaning that for every £100 spent on eligible R&D, your company can reduce its taxable profits by a sum greater than £100.
For loss-making SMEs, it is even more significant: eligible companies can surrender their R&D losses in exchange for a cash repayment from HMRC. This makes R&D tax relief genuinely useful even for businesses that are not yet profitable.
Who qualifies?
This is where many businesses stop reading — assuming that R&D means white coats and laboratories. In practice, HMRC's definition of qualifying R&D is considerably broader.
R&D tax relief can apply to any company that is working to achieve an advance in science or technology by resolving a scientific or technological uncertainty. Qualifying activities exist across a wide range of sectors:
- Construction and engineering — developing new build methods, materials, or structural solutions
- Food production and agriculture — creating new processes, formulations, or growing methods
- Manufacturing — improving production efficiency through novel techniques or machinery adaptations
- Software development — building new tools, platforms, or integrations that are not already commercially available
- Professional services — developing proprietary systems or methods that required overcoming non-obvious technical challenges
The key question is not what industry you are in, but whether your work involved genuine uncertainty about whether a particular technical approach would succeed — and whether you had to investigate and experiment to find out.
