R&D Tax Relief — Merged RDEC Scheme

R&D Tax Relief — Merged RDEC (Scheme)

Administers United Kingdom tax-research support claims through HMRC filing workflows connected to corporate innovation activity.

The Merged RDEC is the operative UK R&D tax credit scheme for all companies with accounting periods beginning on or after 1 April 2024, replacing both the old SME R&D scheme and the pre-2024 RDEC. Administered by HM Revenue and Customs, the scheme provides a 20% above-the-line expenditure credit on qualifying R&D costs in science and technology — projects must seek a genuine advance in knowledge and resolve a scientific or technological uncertainty that a competent professional could not readily resolve. Mathematical advances have qualified as science from 1 April 2023. The credit is taxable as trading income, effectively delivering a post-tax benefit of approximately 15p per £1 of qualifying expenditure for a company paying at the 25% main rate.

The credit applies to qualifying staffing costs, consumables, software, data licences, contract research with qualifying bodies, and externally provided workers, though overseas contractor costs now face restrictions for accounting periods from 1 April 2024. The credit first offsets Corporation Tax due, then other HMRC liabilities, and the remainder is paid as cash — but subject to a PAYE cap equal to £20,000 plus 300% of the company's relevant PAYE and NIC liabilities. Under the Merged RDEC, any excess above the PAYE cap carries forward to the next accounting period rather than being forfeited. There is no cap on qualifying expenditure and no competitive review — eligibility is determined by statute and HMRC technical guidance.

Claims are made through the annual Corporation Tax return (CT600) supported by a mandatory Additional Information Form (AIF), which must be submitted to HMRC before the CT600 is filed. First-time claimants and companies that have not claimed within the past three years must also submit a Claim Notification in advance. Companies may apply for Advance Assurance from HMRC before undertaking the R&D, which can reduce uncertainty about claim validity. SMEs that are loss-making and meet the 30% R&D intensity condition should evaluate whether the Enhanced R&D Intensive Support scheme (ERIS) would provide a higher effective rate before electing the Merged RDEC.