The R&D tax relief a UK fintech claimed in 2021 no longer exists in the form it took then. For accounting periods beginning on or after 1 April 2024, the SME scheme and RDEC have been replaced by a single relief: the merged R&D Expenditure Credit. One scheme, one rate, for a ten-person payments start-up and a listed bank alike.
Most finance teams have absorbed the headline. Fewer have revisited the claim underneath it, where the changes that decide whether a claim survives HMRC scrutiny actually sit.
What the merged scheme pays
A taxable credit worth 20% of qualifying R&D expenditure, which lands at between 14.7p and 16.2p per £1 once tax is accounted for.
On £100,000 of qualifying spend the gross credit is £20,000. A company paying corporation tax at the 25% main rate keeps £15,000; one at the 19% small profits rate keeps £16,200. The low end of the range catches companies in the marginal band, where augmented profits fall between £50,000 and £250,000 and the effective rate is 26.5%: they keep £14,700. A loss-maker receives £16,200 in cash, because the notional tax deducted from its credit is fixed at 19% whatever rate it would otherwise pay.
The credit sits above the line, in operating performance rather than below the tax charge, so it is visible to your board and to anyone reading the accounts during a raise. Our guide to the merged scheme covers the mechanics, including the PAYE cap that restricts payable credits where the UK payroll is small and development is largely outsourced.
One carve-out survives: a loss-making SME whose relevant R&D expenditure is at least 30% of its total relevant expenditure claims Enhanced R&D Intensive Support instead, at up to 26.97p per £1. Pre-revenue fintechs should work that ratio first, and the ERIS intensity calculator does it including connected companies.
Why fintech claims get argued hardest
The rate is the easy part. The definition is where these claims are won and lost, and it has not softened.
Qualifying R&D means a project seeking an advance in a field of science or technology by resolving uncertainty that a competent professional could not readily resolve. The advance has to belong to the field, not to your company. That makes uncomfortable reading for a sector where much of what gets built is genuinely difficult, commercially novel and technologically routine all at once.
Building a product on established frameworks, languages and APIs used as intended is not R&D. Neither is configuring an existing platform, replicating functionality the field already understands, or interface work, however much engineering judgement it takes. What can qualify is narrower: algorithms developed because published approaches cannot meet a constraint on scale, latency, accuracy or concurrency, or integration whose combined behaviour cannot be settled from documentation.
Where a qualifying core sits inside a larger commercial build, as it usually does in fintech, the claim covers the work that resolved the uncertainty, not the product around it. Drawing that boundary precisely separates a defensible claim from one written in product language. What counts as qualifying R&D works through the test element by element, and our software sector page sets out where the line falls for development work specifically.
The deadline that ends the conversation
If your company has never claimed, or has not claimed in the three years ending with your notification deadline, you must tell HMRC you intend to claim within six months of the end of your period of account. Miss it and the claim is invalid. Not reduced, not delayed. HMRC has no discretion to accept a late notification, there is no appeal, and the two-year window for amending the return does not rescue you.
The rule applies to accounting periods beginning on or after 1 April 2023, and it bites hardest on early-stage companies, whose heaviest development spend sits in the years nobody spent reading tax legislation. Count the exact day: six months from a 30 June year end is 31 December, and a diary entry recording only the month is how these get missed. Our claim notification deadline checker returns the date in seconds, and the claim notification guide explains who is caught.
Preparing for the one in six
HMRC checked around one in six R&D claims in 2023-24, its latest published figure, with more than 500 staff working on R&D compliance. Enquiries run for months rather than weeks, and while one is open the payable credit for that period is unlikely to be paid, which matters more to a company that has budgeted the cash than the outcome does.
Defensible preparation starts from the statutory definition rather than the spend. Projects are selected because they meet the test. The competent professional is interviewed and their reasoning recorded. The uncertainty is documented as it was experienced, failed approaches included. Costs reconcile to the accounts, and the Additional Information Form answers HMRC’s questions before they are asked.
For a software business the most persuasive evidence is usually already in the building: version control history timestamps the iterations and shows the dead ends a tidy write-up loses. What an enquiry involves, and how prepared claims hold up, is covered in our guide to HMRC R&D enquiries.
If you want a straight answer on whether your development work qualifies, talk it through with a chartered adviser. And if we do not think you should claim, we will say so.
Sources
- R&D tax relief: the merged scheme and ERIS — the 20% expenditure credit, the ERIS intensity condition and the rates behind the figures above.
- Guidelines on the meaning of R&D for tax purposes — the advance, uncertainty and competent professional tests that decide which development work qualifies.
- Tell HMRC that you’re planning to claim R&D tax relief — the claim notification requirement and the six-month window.
- HMRC’s approach to R&D tax reliefs 2023 to 2024 — the compliance coverage behind the one-in-six figure and the resource committed to R&D checks.
This article describes the rules as they stood at the review date above. The rules change: for the current position, start with our guides or talk to us.
