How to Check Your Eligibility for R&D Tax Credits in the UK

Research and Development (R&D) Tax Credits are one of the UK’s most valuable incentives for businesses investing in innovation. They can significantly reduce a company’s tax bill or provide a cash repayment, making them a vital funding source for organisations developing new products, processes, or services. However, before starting an R&D claim process, it is essential to establish whether the work meets HMRC’s eligibility criteria.

Understanding the Importance of Eligibility

The UK government introduced R&D tax relief to encourage companies to innovate and boost economic growth. HMRC applies strict definitions, and only certain types of projects qualify. Assessing eligibility early helps businesses avoid wasted effort, non-compliance, or under-claiming.

FI Group provides detailed guidance on the eligibility for R&D tax credits and has supported thousands of claims across multiple sectors, from manufacturing and engineering to software, life sciences, and energy.

HMRC’s Definition of R&D

HMRC bases eligibility on the internationally recognised Frascati Manual definition. In summary, projects must:

• Seek to achieve an advance in science or technology.
• Address scientific or technological uncertainty that could not be easily solved by a competent professional.
• Involve systematic, investigative, and experimental activity.

Routine work, cosmetic changes, or projects without genuine innovation typically do not qualify.

The UK R&D Schemes

From April 2024, the UK operates two main schemes:

1. Merged R&D Expenditure Credit (RDEC) – open to most companies and replacing the separate SME and large company schemes.
2. Enhanced R&D Intensive Support (ERIS) – aimed at loss-making SMEs where more than 30% of total expenditure is on R&D.

The scheme your business falls under determines the relief rate, qualifying costs, and claim method.

Key Steps in the R&D Claim Process

A typical R&D claim involves:

1. Project Identification – reviewing activities against HMRC’s definition.
2. Evidence Gathering – collecting technical documentation, timesheets, financial data, and project notes.
3. Technical Narrative – explaining the scientific or technological advances sought, uncertainties faced, and how these were resolved.
4. Cost Calculation – identifying and apportioning eligible costs, such as staff, subcontractors, consumables, software, and utilities.
5. Submission – filing the claim as part of the Company Tax Return (CT600) with supporting documentation.
6. Enquiry Management – responding to HMRC questions or compliance checks.

Common Eligibility Mistakes

Businesses often miss out on valuable funding by:

• Assuming their industry is “not innovative enough”.
• Overlooking qualifying indirect activities.
• Lacking robust documentation.
• Including ineligible costs, leading to HMRC challenges.

Specialist advice can help ensure all potential qualifying activities are identified and evidenced.

Why Work with an R&D Tax Specialist?

While it is possible to make a claim without external help, the complexity of HMRC’s rules means many businesses underclaim or face compliance issues. Advisory firms with dedicated R&D teams, such as FI Group, bring technical expertise, sector-specific insight, and a proven process for maximising claims while maintaining compliance.

Next Steps

If your business is undertaking innovative projects and you are unsure about your eligibility for R&D tax credits, start by reviewing HMRC’s definition and assessing your activities against it. For comprehensive guidance and support through the R&D claim process, read FI Group’s full eligibility guide here.