R&D Tax Relief Changes: What Innovative Businesses Need to Know

R&D Tax Relief Changes: What Innovative Businesses Need to Know

Research & Development (R&D) tax relief for innovative businesses remains a valuable source of funding for UK innovation, but the claims environment has changed. HMRC’s latest figures for 2024–25 show that total relief increased by 5% to £8.2 billion, while the overall number of claims fell by 17% to 40,325 of which Claims by SMEs dropped by 19%.

Why are R&D tax relief claims falling?

A major factor is the Additional Information Form (AIF), mandatory since August 2023. Businesses must submit detailed project and cost information through HMRC’s portal before including an R&D claim in their Corporation Tax return. Failure to submit the form invalidates the claim.

The tighter process is designed to reduce error and abuse, but it also raises the standard of evidence expected from genuine innovators. Scheme restructuring has affected the figures too, with some SMEs now claiming through the merged RDEC scheme rather than the former SME routes. SME Intensive and ERIS claims fell by 36% to 4,965 approvals.

What this means for innovative businesses

A lower claim count does not mean innovation has slowed. It may indicate that eligible businesses are being discouraged by complexity, uncertainty or the compliance burden. For businesses developing new products, processes, software or technical solutions, the opportunity may still be significant—but claims must be carefully prepared and supported.

Things businesses need to consider –

• Identify qualifying work early: Record the technological or scientific uncertainty, the advance sought and the work undertaken.
• Keep evidence as projects progress: Retain technical notes, staff-time records and cost calculations rather than reconstructing them at year-end.
• Choose the correct scheme: Check whether the merged RDEC or Enhanced R&D Intensive Support rules apply.
• Submit the AIF correctly: Align the form with the Corporation Tax return and supporting calculations.
• Review claim governance: Make sure technical, finance and tax teams agree the claim narrative and figures.

With qualifying expenditure reaching £51 billion, R&D tax relief continues to play an important role in supporting investment. The key is not to walk away from a potentially valuable incentive, but to approach it with evidence, clear processes and specialist review where needed.

Planning an R&D claim? Review your projects and records early so you can assess eligibility, meet HMRC’s requirements and protect the value of your innovation investment.

Here at Kennedys Accounting we are experienced in completing R&D claims and will be pleased to discuss your innovative ideas with you and assist with the relevant claims in a timely professional way – feel free to get in touch.