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What are R&D Tax Credits?

To put it simply, the Government wants to support UK companies that are willing to push innovation. This does not need to be blue-sky research, HMRC’s definition of R&D encompasses far more than you may realise.

R&D tax credits are a valuable tax incentive created to reward companies who invest in research and development activities. Their goal is to reward past and encourage future R&D spending, benefiting industry and the UK economy.

So what does this mean for your company? If your business invests time, money and resources into developing or improving products, technical processes or services, you may be entitled to receive R&D tax credits, either in the form of a cash payment or a reduction in your corporation tax bill. And at LimestoneGrey we’re here to help you achieve the maximum repayment possible.

Fuelling your Business Growth

R&D tax credits can play an integral part in your business strategy; fuelling your company’s growth by providing additional capital that can be invested into future projects. This is not a one-off strategy. Depending on eligibility, R&D tax credits can be claimed yearly, providing a stream of cash injections that can be vital for accelerating company growth.

Typically, the R&D tax credit claim process takes between 4-6 weeks from start to submission. HMRC work towards a target of assessing all SME claims within 8 weeks. This means you could receive a substantial cash payment directly in your bank within 12 weeks.

How Much Can I Claim?

The size of your R&D benefit ultimately depends on how much your company has invested in research and development activities and the relief available to you. Currently, there are four distinct R&D tax credit schemes: SME R&D tax relief (offering up to 33% of eligible R&D spend), the Research and Development Expenditure Credit (RDEC), which provides up to 20%*, the new Merged R&D tax scheme (also up to 20%), and the R&D SME Intensive Relief (providing up to 27%).

Categories of expenditure that can be included in your tax credit claim are:

Your Payroll

You can include the cost of employees used to undertake the research and development activities within your company. Costs you may be able to include are:

  • Gross salary
  • Employers’ national insurance contributions
  • Employers’ pension contributions
  • Reimbursed employee expenses


Materials used within your research and development activities can be included in your claim. This may include the cost of raw materials as well as light, heat and water charges.

External Workers

If you have used any external labor to conduct your research and development activities, such as agency staff, these costs could be reclaimed.


If you have purchased software for your research and development project, the cost of this software could be included. For accounting periods starting on or after 1 April 2023, data licences and cloud computing costs can also be claimed.


If you’ve had to subcontract elements of your research and development projects to third parties (such as testing services), that’s okay. In certain circumstances, part of these costs could be reclaimed.

Clinical Trials

If you have had to pay individuals for participation in clinical trials to test new medications or treatments, these costs can be included in your R&D tax credit claim.

The rules surrounding R&D tax credits are extensive. LimestoneGrey works stringently to HMRC’s guidance

HMRC has a very defined description of what is R&D for tax purposes. Information can be found here.

*Unlike SME relief, RDEC is taxable income, up to 20p for every £1 relates to the amount before the deduction of tax.