R&D Tax Credits
R&D tax credits allow UK limited companies to reduce Corporation Tax or receive a cash repayment for developing new or improved products, software or processes where scientific or technological uncertainty existed. Claims must now follow strict HMRC compliance rules, including advance notification, a detailed technical narrative, an Additional Information Form and correct reporting on the CT600 tax return.
What Are R&D Tax Credits?
Complete UK Guide with CT600 Worked Examples
R&D tax credits are a government incentive designed to reward companies that attempt to achieve technological or scientific advancement through systematic problem-solving.
Your company does not need to be successful. What matters is that:
A technical problem existed
The solution was uncertain at the start
A structured attempt was made to resolve it
New knowledge was created or attempted
This applies to industries such as:
Software and app development
Engineering and manufacturing
Construction innovation
Architecture and design
Food production and processing
Environmental technology
AI and data systems
The New HMRC Rules for R&D Claims (Mandatory)
Since August 2023 and strengthened from April 2024 onwards, HMRC introduced new compliance rules to reduce abuse and increase claim quality.
All claims must now meet the following conditions:
1. Advance Notification
First-time claimants (or companies that missed their last claim) must notify HMRC within 6 months of the accounting period end that they intend to make an R&D claim.
No notification = automatic rejection.
2. Additional Information Form (AIF)
This form must be submitted before the CT600 and must include:
Project descriptions
Scientific or technological uncertainties
Methodology used
Qualifying cost breakdown
Senior officer declaration
Without this form, the CT600 claim is invalid.
3. Technical Narrative
A compliant narrative must explain:
What was attempted
Why it was difficult
What alternatives were tested
What technical knowledge was gained
Generic or copy-paste narratives are now routinely rejected.
4. Digital Submission Only
Claims must be:
Submitted digitally
Linked to the CT600
Filed by an authorised company officer
Accompanied by the AIF
What Costs Can Be Claimed?
Qualifying expenditure must be directly linked to R&D activity:
Gross staff salaries
Employer NIC and pension
Software licences
Cloud computing services
Utilities used in R&D
Consumables
Certain subcontractors (restricted rules)
Qualifying Costs Table
| Cost Category | Qualifies | Conditions |
|---|---|---|
| Staff wages | Yes | Only time spent on R&D activities |
| Employer NIC & pension | Yes | Apportioned to R&D staff |
| Software & cloud | Yes | Used directly in R&D projects |
| Consumables | Yes | Consumed in experimentation |
| Overseas subcontractors | Usually no | Very limited exceptions |
| Rent, marketing, sales | No | Not R&D activity |
HOW R&D IS ENTERED ON THE CT600 – WITH WORKED EXAMPLES
The R&D claim impacts three areas:
Company profit or loss
Corporation Tax calculation
R&D boxes on the CT600 return
Below are three fully worked scenarios with box references.
SCENARIO 1 – PROFITABLE COMPANY (MERGED SCHEME)
Facts:
Trading profit before R&D relief: £100,000
Qualifying R&D costs: £30,000
Enhancement rate: 20%
Corporation Tax rate: 25%
Step 1: Calculate Enhanced R&D Deduction
£30,000 × 20% = £6,000 additional deduction
Total R&D deduction = £36,000
Step 2: Adjust Taxable Profit
£100,000 – £6,000 = £94,000 taxable profit
CT600 Entry Table – Scenario 1
| CT600 Box | Description | Figure Entered | Explanation |
|---|---|---|---|
| Box 145 | Trading profit | £100,000 | Profit before R&D adjustment |
| Box 660 | R&D qualifying expenditure | £30,000 | Total qualifying costs |
| Box 670 | R&D enhanced deduction | £6,000 | 20% enhancement |
| Box 155 | Taxable total profits | £94,000 | After R&D relief |
| Box 180 | Corporation tax due | £23,500 | 25% of £94,000 |
SCENARIO 2 – LOSS-MAKING COMPANY CLAIMING PAYABLE CREDIT
Facts:
Trading loss before R&D relief: £40,000
Qualifying R&D costs: £25,000
Enhancement rate: 20%
Surrender rate: 27%
Step 1: Calculate Enhanced Loss
£25,000 × 20% = £5,000 enhancement
Total enhanced loss = £45,000
Step 2: Surrender Loss for Credit
£45,000 × 27% = £12,150 payable credit
CT600 Entry Table – Scenario 2
| CT600 Box | Description | Figure Entered | Explanation |
|---|---|---|---|
| Box 145 | Trading loss | £40,000 | Loss before R&D |
| Box 660 | Qualifying R&D spend | £25,000 | Eligible costs |
| Box 670 | R&D enhanced amount | £5,000 | 20% enhancement |
| Box 795 | Surrenderable loss | £45,000 | Enhanced loss total |
| Box 825 | Payable credit claimed | £12,150 | 27% of surrendered loss |
SCENARIO 3 – R&D INTENSIVE SME (HIGHER CREDIT)
Facts:
Total company costs: £200,000
R&D costs: £90,000 (45% of total)
Trading loss: £50,000
Enhanced loss: £18,000
Surrender rate: 27%
Step 1: Enhanced Loss
£90,000 × 20% = £18,000
Total loss = £68,000
Step 2: Payable Credit
£68,000 × 27% = £18,360
CT600 Entry Table – Scenario 3
| CT600 Box | Description | Figure | Explanation |
|---|---|---|---|
| Box 660 | R&D spend | £90,000 | Qualifying costs |
| Box 670 | Enhanced deduction | £18,000 | 20% uplift |
| Box 795 | Total surrenderable loss | £68,000 | Original loss + enhancement |
| Box 825 | Payable credit | £18,360 | 27% of surrendered loss |
Evidence HMRC Expects to See
You must retain:
Project documentation
Staff time allocation
Payroll records
Cost spreadsheets
Software invoices
Technical narrative
Cloud usage logs
Claims can be reviewed up to six years later.
Common Errors That Cause Rejection
Missing advance notification
Submitting CT600 without AIF
Claiming routine work
No technical uncertainty
Copy-paste narratives
Overseas subcontractor misuse
Director dividends included
Incorrect CT600 box entries
Why Accurate CT600 Reporting Matters
Incorrect box entries can cause:
Automatic claim rejection
HMRC enquiry
Delayed repayments
Penalties
Full clawback
R&D relief must align perfectly with your statutory accounts and Corporation Tax computation.
Claim Your R&D Tax Credits the Right Way
R&D tax credits are now one of the most heavily scrutinised reliefs in the UK tax system. A compliant claim requires:
Technical understanding
Accurate cost calculation
Correct CT600 reporting
HMRC-ready documentation
We prepare fully compliant R&D claims from project review to CT600 submission, ensuring your claim is accurate, defensible and paid without delay.
Transparent, HMRC-Compliant Pricing
Our R&D tax credit services are priced based on the complexity and value of your claim. Every package includes technical documentation, HMRC-compliant submission and accurate CT600 integration. No speculative claims. No hidden fees. No risk-driven commission pressure.
| Service Level | Essential Claim | Compliance Plus | Full Protection |
|---|---|---|---|
| Best for | Simple R&D projects | Most companies | Complex or high-value claims |
| Technical Narrative | ✔ | ✔ Detailed | ✔ Advanced & multi-project |
| Cost Analysis | ✔ | ✔ Enhanced review | ✔ Forensic level |
| Additional Information Form | ✔ | ✔ | ✔ |
| CT600 Integration | ✔ | ✔ Full alignment | ✔ Full alignment |
| Evidence Pack | Basic | HMRC-ready | Audit-defence pack |
| HMRC Enquiry Support | ✖ | ✔ Email support | ✔ Full enquiry handling |
| Turnaround Time | 10 working days | 7 working days | Priority service |
| Price | From £995 | From £1,495 | From £2,495 |
| Get Started | Book Review | Speak to Specialist |
All R&D claims are reviewed by qualified UK tax professionals and prepared in line with current HMRC compliance rules.
R&D Tax Credits FAQs
What qualifies as R&D for tax purposes?
R&D must involve scientific or technological uncertainty and a systematic attempt to resolve it. Routine upgrades or cosmetic changes do not qualify.
Who can claim R&D tax credits?
Any UK limited company developing or improving products, software, systems or processes may qualify if technical uncertainty exists.
What are the new HMRC rules for R&D claims?
Claims now require advance notification, a technical narrative, an Additional Information Form and digital submission linked to the CT600 return.
How long do I have to claim R&D tax credits?
Claims must be made within two years of the accounting period end, but advance notification is required for first-time or missed claims.
Can HMRC investigate R&D claims?
Yes. HMRC can open enquiries up to six years after submission and now uses AI risk profiling to review claims.
Do software companies qualify for R&D tax credits?
Yes. Software development frequently qualifies when technical uncertainty exists and solutions are not readily available.
How are R&D tax credits shown on the CT600?
R&D costs and enhancements are entered into specific CT600 boxes that adjust taxable profit or create a payable credit.