R&D Tax Relief Explained

What is R&D Tax Relief?

The UK Government introduced research and development (R&D) tax relief in the year 2000 to encourage scientific and technological innovation within the UK.

R&D tax relief is an excellent opportunity for UK businesses to receive tax incentives when they invest in research and development. The scheme rewards past R&D spending whilst also encouraging future investment, directly benefiting industry and the UK economy.

Could R&D Tax Credits benefit my business?

If your business invests significant amounts of time, money, and resources in developing or improving products, processes, or services, you might be entitled to receive a generous R&D tax benefit. 

At Libcus, we have an expert team dedicated to ensuring our clients receive the maximum repayment possible.

Where eligible, you can file an R&D tax relief claim each year. The benefit is calculated as a percentage of your qualifying expenditure, i.e., how much you have spent on activities considered “R&D for tax purposes” that year. More information regarding the types of activities that qualify for tax relief is provided below. 

If your company is profitable, you can use your claim to reduce your company’s tax bill to a greater extent than standard deductions. In the event that your company may be facing losses (i.e., it does not owe any tax for that year), there are still advantages to claiming. You may be given the benefit of additional losses that can be carried over into future tax years, or the losses could be surrendered for an immediate cash benefit – a ‘tax credit’.

Latest HMRC R&D Statistics

Over £46.7 Billion in R&D tax relief has been claimed since the scheme began.

Latest changes to R&D Tax Relief

Changes have been announced for the scheme from 1st April 2023.

Who Is Eligible to Claim R&D Tax Credits?

In order to make an R&D claim, there are some basic eligibility criteria that your business must meet:

  1. Your business must be subject to UK Corporation Tax - this typically means that it is registered in the UK as a Limited business.
  2. You must be performing Research &  Development (R&D)
  3. You must have spent money on this R&D.

In addition, Your activities must meet two main criteria from HMRC in order to be considered ‘R&D for tax purposes’

Technological Advance

Your project must aim to create an advance in the overall field of science and technology, not just for your business. This means an advance cannot just be an existing technology that has been used for the first time in your sector. In practice, you could be developing new products, processes or services, improving something that already exists or duplicating existing processes in a new way.

Resolution of Technical Uncertainty

A scientific or technological uncertainty exists when an expert on the subject cannot say if something is technologically possible or how it can be done even after referring to all available evidence. You need to be able to explain that there is a technological uncertainty and the work you did to overcome this.

Which scheme is right for my business?

There are two main types of R&D relief - the Small and Medium sized Enterprises (SMER&D Relief and the Research and Development Expenditure Credit. Deciding which scheme is right for you is largely dependent on the size of your business, but there are other factors that need to be taken into account.

What costs can be included in an R&D claim?

Irrespective of what industry or sector you are, we can help you identify eligible activities for R&D for tax purposes. From 1 April 2023,  the government is extending the scope of qualifying expenditure to include data & cloud computing costs. To find out more please click here.

Staff Costs

Costs of employees used to undertake the R&D activities including gross salary, employers’ NI and pension contributions.


Materials used within your R&D activities including the cost of raw materials and utilities like light, heat and water.


If you have subcontracted elements of your R&D projects to 3rd parties, you may be eligible to reclaim part of these costs.


The costs of software purchased or used specifically on R&D activities.

Externaly Provided Workers

EPW’s provided by a 3rd party, such as agency staff.

Clinical Trials

Paying volunteers to participate in pharmaceutical clinical trials.

Are R&D Tax Credits available to companies in my sector?

We find that companies from all sectors and all industries have the potential to claim UK R&D tax relief. Follow the link below to find out more.

Frequently Asked Questions

Below are some frequently asked questions about making R&D tax relief claims. If you have any further questions please visit our Question Hub or contact our team who will be happy to advise you.

The research and development (R&D) tax credit claim time limit is two years from the end of the accounting period the claim relates to. Before this period ends you must submit a claim for any qualifying expenditure that you’ve identified during that period.

Costs that cannot be claimed for include:

  • the production and distribution of goods and services
  • capital expenditure
  • the cost of land
  • the cost of patents and trademarks
  • rent or rates

There are no restrictions on the sector or type of business that can qualify provided they meet the claim criteria. The R&D scheme supports any company working on innovative projects. Common sectors with companies already benefiting from the scheme include: Adhesives, Architecture, Construction, Design, Electronics, Engineering, Environmental, Food Manufacturing, Lighting, Medical, Packaging, Plastics, Printing, Software and IT and Textiles.

HMRC aim to make payments within 28 days for SMEs claiming research and development (R&D) tax credits. Corporation Tax repayments can be much quicker, and sometimes come through within a week of your claim being filed.

Unfortunately, it is unlikely you can claim if you are a soletrader. Sole traders do not pay UK Corporation Tax and, as a result, they cannot claim R&D tax credits. R&D tax credits are form of Corporation Tax relief and so — if you’re a sole trader — you’re not registered for UK Corporation Tax and cannot make a claim.

Great news! R&D tax relief can even be claimed on unsuccessful or aborted projects. Provided you have tried to or successfully overcome uncertainty, there’s a strong basis for a claim. 

Why work with Libcus?

The R&D tax relief scheme is an extremely valuable support for businesses, but it can also be quite complicated. With over 15 years of experience working within this scheme, we are in a unique position to have helped support a wide variety of industries claim back their R&D tax relief.

Our approach is welcoming and nurturing, and we take pride in supporting our clients by offering regular visits to their premises, if needed, to discuss, review, and capture R&D activity, thereby maximising their benefits.

Our team is dedicated to carrying out as much of your R&D legwork as possible. From identifying eligible projects to writing technical narratives and tackling difficult R&D calculations, we strive to deliver top-tier services at every turn.

Contact us today to learn how we can help you successfully claim your R&D tax relief.

Introduction to R&D Tax Relief

View our PDF guide for more information

Want to know more?

Are you ready to start your R&D Claim?

Talk to our team today to find out if your projects qualify