R&D tax relief •14 min read

R&D tax relief glossary: the terms defined

MJ

Matthew Jones ACA CTA

Last reviewed August 2026 · Editorial standards

R&D tax relief carries more vocabulary than most parts of the tax code, and a good deal of it is undefined in the places companies meet it first: a letter from HMRC, a form field, an adviser’s email. This page defines the terms in plain language and links each one to the guide that covers it properly.

Definitions here are deliberately short. They tell you what a thing is; the linked page tells you how it works, what it is worth and where it goes wrong. If you are starting from nothing, start instead with the complete guide to R&D tax relief.

A–B

Additional deduction. An amount deducted from taxable profits on top of the money actually spent. Under ERIS a company deducts a further 86% of its qualifying R&D expenditure on top of the normal 100%, giving a total deduction of 186%.

Additional Information Form (AIF). HMRC’s mandatory online form carrying the substance of a claim: the project descriptions, the qualifying costs, the senior internal R&D contact and every agent involved. It has been required for every claim since 8 August 2023 and must reach HMRC before or with the CT600. Set out in full in the Additional Information Form explained.

Advance assurance. HMRC’s service giving its view on a claim before it is filed. Full claim advance assurance covers an eligible first-time SME claimant’s whole claim; the separate Targeted Advance Assurance pilot, running until May 2027, gives a view on up to two areas chosen from four defined ones. Both are explained in can I get advance assurance for an R&D claim?

Advance in science or technology. An extension of the overall knowledge or capability of a field, not just of your own company. Work that was new to your business but already established in the field is not an advance, however much effort it took. One of the four elements of qualifying R&D.

Appreciable improvement. An improvement to an existing process, material, device, product or service through scientific or technological change, set at more than a minor or routine upgrading — something a competent professional would acknowledge as genuine and non-trivial. It is one of the forms an advance can take: see what counts as qualifying R&D and what doesn’t count as R&D.

Baseline. The level of science or technology the project planned to advance on: what was publicly known and achievable in the field before the work began. The Additional Information Form asks for it directly, and it is set by the field’s frontier rather than by the company’s own starting position.

C

CIRD. HMRC’s Corporate Intangibles Research and Development manual, the internal guidance its officers work from. Our guides cite it alongside the legislation and gov.uk guidance so that statements of law can be verified rather than taken on trust — see how we are regulated.

Claim notification. The short online form that, for accounting periods beginning on or after 1 April 2023, a first-time claimant or a company that has not claimed in the three years ending with the notification deadline must file within six months of the end of its period of account. There is no late route: miss it and the claim is invalid. Covered in the R&D claim notification requirement.

Closure notice. The notice ending an HMRC enquiry, stating the officer’s conclusions and either recording that no amendment is needed or making the amendments required to give effect to them. The appeal lies against the amendment: in writing, within 30 days after it was notified to the company. Set out in what happens if my R&D claim is rejected?

Competent professional. Someone with relevant qualifications or experience, or both, in the specific field of science or technology the project sits in. The whole definition of R&D runs through their eyes: the test is whether such a person could readily resolve the uncertainty from existing knowledge. Explained in who counts as a competent professional?

Connected companies. Companies within the same control relationship. They are counted on both sides of the ERIS intensity ratio, so a company that looks comfortably intensive on its own figures can fail on the group’s. The mechanics are in the 30% R&D intensity condition. (Aggregation for the SME test runs on a different concept: see Linked and partner enterprises below.)

Consumables. Materials used up or transformed in the R&D, plus the light, heat, water and power it consumes. Items that end up in something sold in the ordinary course of business fall outside the category. One of the six qualifying cost categories.

Contracted-out R&D. R&D one company pays another to carry out. Only one of them can claim it: the customer claims where it intended or contemplated that specific R&D when the contract was made, and otherwise the contractor claims in its own right. Worked through in contracted-out R&D: who claims?

Corporation Tax Act 2009 (CTA 2009). The statute containing the R&D reliefs. The merged scheme sits in Chapter 1A of Part 13, inserted by Finance Act 2024 — see is R&D tax relief State aid? — and ERIS in Chapter 2, which decides what rescue route is open if a claim is removed.

CT600. The company tax return. An R&D claim is made in it, which is why backdating a claim means amending a return already filed. The steps are in how do I claim R&D tax credits?

D–F

Discovery assessment. HMRC’s route to recovering relief after the twelve-month enquiry window has closed, available where relief given is or has become excessive. The time limits run to four years ordinarily, six for careless behaviour and twenty for deliberate — see can HMRC make me pay back an R&D tax credit?

DSIT Guidelines. The Guidelines on the meaning of research and development for tax purposes, issued by the Department for Science, Innovation and Technology. They carry the statutory definition of R&D — the project, the advance, the uncertainty and the competent professional test — and are applied in what counts as qualifying R&D.

Enhanced R&D expenditure. Qualifying costs uplifted by a set percentage, with the enhanced amount deducted from taxable profits before the tax is worked out. It is a sum taken off the profit, several steps from any cash, so an enhancement figure is not what a claim pays — a distinction drawn in the Tanglewood tribunal decision.

Enhanced R&D Intensive Support (ERIS). The relief for loss-making SMEs whose relevant R&D expenditure is at least 30% of their total relevant expenditure. It pays up to 26.97p per £1 of qualifying spend, in cash and tax free, the most generous rate in the current system. Covered in full in the ERIS guide.

Enquiry. A formal HMRC compliance check into a claim, opened by letter. HMRC checked around one in six R&D claims in 2023-24, its latest published figure. What one involves, and how claims are defended, is in HMRC R&D enquiries.

Error and fraud. HMRC’s estimate of the proportion of R&D relief incorrectly claimed, published separately from the annual statistics. It fell from 17.6% in 2021-22 to a measured 6.4% in 2023-24 — the trend that explains the current compliance regime, read in HMRC’s R&D statistics explained.

Externally provided worker (EPW). A worker supplied by a third party, typically an agency, who works under your direction but is paid by their provider. Payments to unconnected providers qualify at 65%, and for accounting periods beginning on or after 1 April 2024 only where the workers are within UK PAYE and Class 1 NIC. The conditions are in which costs qualify.

First-tier Tribunal (FTT). The first tier of the tax tribunal, reached after an appeal to HMRC and any statutory review: corporation tax is a direct tax, so you cannot start at the tribunal. Its decisions are cited in the form [2026] UKFTT 1137 (TC), which is the Tanglewood decision. The route to it is set out in what happens if my R&D claim is rejected?

G–L

GfC3. HMRC’s guidelines for compliance on R&D, published as “Help to see if your work qualifies as research and development for tax purposes”. It is not the statutory definition — the DSIT Guidelines carry that — but it describes what HMRC expects of a competent professional and of the records behind a claim.

Going concern. A condition of claiming, met where the latest published accounts were prepared on a going concern basis, that basis did not depend on the relief itself, and the company is not in liquidation or administration. Set out in who can claim R&D tax relief?

Grace period. The one further period a company can claim ERIS in after its intensity drops below 30%. It has to be earned: the company must have met the intensity condition in its most recent prior twelve-month period and actually obtained relief for it. Explained in the ERIS guide.

Ineligible company. A body that cannot claim whatever it spends: a charity, an institution of higher education, a scientific research association or a health service body. It is a test of what the body is, not what it does — see can a charity claim R&D tax relief?

Intended or contemplated. The test deciding who claims contracted-out R&D: whether the customer had that specific R&D in mind when the contract was made. Evidence, not labels, settles it. Worked through in contracted-out R&D: who claims?

Intensity condition. The gateway to ERIS: relevant R&D expenditure of at least 30% of total relevant expenditure, with connected companies counted on both sides. Total relevant expenditure is broadly the trading costs in the accounts, not just the R&D ones. Explained in the 30% R&D intensity condition.

Linked and partner enterprises. Other businesses whose figures are added to yours when testing SME status. Linked enterprises, broadly holdings of more than 50% of the voting rights, are added in full; partner enterprises, holdings of 25% to 50%, in proportion to the stake. Covered in what happens if my company outgrows the SME definition?

M–P

Merged R&D expenditure credit (merged RDEC). The single scheme for accounting periods beginning on or after 1 April 2024, paying a taxable credit of 20% of qualifying expenditure, worth 14.7p to 16.2p per £1 after tax. It applies to companies of every size except loss-making SMEs claiming ERIS. Covered in the merged R&D scheme explained.

Notional tax. Tax calculated on a loss-maker’s merged scheme credit even though there are no profits to pay it from, deducted at the 19% small profits rate. It is why the loss-maker’s net rate is 16.2p rather than 20p, and it is not lost: it carries forward or can be surrendered within a group. Shown working in the worked examples.

Old SME scheme. The pre-merger relief for smaller companies, applying to accounting periods beginning before 1 April 2024. It ran on an additional deduction and a payable credit on surrendered losses, at rates that changed in April 2023. The figures are in R&D tax relief rates by year.

Overseas restriction. The rule limiting relief to work done in the UK for accounting periods beginning on or after 1 April 2024: subcontracted R&D only where undertaken in the UK, EPWs only where within UK PAYE and Class 1 NIC. The narrow way through it is in overseas R&D costs.

Patent Box. A separate relief applying an effective 10% corporation tax rate to profits attributable to qualifying patents. It sits alongside an R&D claim rather than competing with it — see can I claim Patent Box and R&D tax relief together?

PAYE cap. The limit on the cash credit a company can receive in a period: £20,000 plus 300% of its relevant PAYE and National Insurance contributions. It applies under both current schemes, with an exemption turning on intellectual property activity and low connected-party subcontracting. Explained in what is the PAYE cap?

PCRT. Professional Conduct in Relation to Taxation, the conduct rules binding members of the main tax and accountancy bodies. It requires advice to have a sustainable basis in law and prohibits letting a fee shape a filing position; an adviser outside those bodies is bound by none of it. Set out in how to choose an R&D tax adviser.

Period of account. The period for which a company draws up accounts. It is usually the same as the corporation tax accounting period but can differ, and it is the date the claim notification and amendment deadlines both count from — see the claim notification requirement.

Project. A defined piece of work with an objective, a start and an end. Relief is claimed project by project, and the R&D project is usually narrower than the commercial project containing it, beginning when work on the uncertainty starts and ending when it is resolved or abandoned. Covered in what counts as qualifying R&D.

Q–R

Qualifying indirect activities (QIAs). Supporting tasks that form part of an R&D project without themselves resolving the uncertainty — maintaining equipment, recruiting onto the team, preparing the report of findings. The Guidelines treat them as R&D, but the list at paragraph 31 is exhaustive. Set out in what are qualifying indirect activities?

Qualifying overseas expenditure. The narrow exception to the overseas restriction, for conditions necessary for the R&D — geographical, environmental, social or regulatory — that are absent in the UK and would be wholly unreasonable to replicate here. Cost and workforce availability are expressly excluded. Covered in overseas R&D costs.

R&D allowances (RDAs). A 100% capital allowance for capital expenditure on R&D, sitting in the capital allowances rules rather than in R&D tax relief. They are the route for spending the credit cannot reach, such as building a laboratory — see what are R&D allowances?

R&D-intensive. Describing a company that passes the 30% intensity condition. Together with being an SME and loss-making, it is what qualifies a company for ERIS rather than the merged scheme.

RDEC. The R&D expenditure credit: an above-the-line taxable credit, recognised as income in the accounts before the tax charge, and now the mechanism of the merged scheme. Its rates rose from 11% in 2015 to 20% in 2023 — listed in rates by year.

Reasonable care. The standard that decides whether a penalty arises at all on an incorrect claim: where reasonable care was taken there is none, only repayment. A careless error attracts up to 30% of the amount overclaimed, reducible as far as nil where the disclosure is unprompted; the deliberate bands run higher and have floors beneath which they cannot be reduced. The ranges are set out in can HMRC make me pay back an R&D tax credit?

S–T

Scientific or technological uncertainty. Uncertainty existing where knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or readily deducible by a competent professional working in the field. Difficulty, expense and commercial risk are not the same thing. Explained in what is a scientific or technological uncertainty?

Senior internal R&D contact. The named senior person at the claimant company, connected to the R&D, who must be identified on the Additional Information Form. HMRC’s follow-up questions are directed there, so it should be someone who can speak to the technical work.

SME. For R&D purposes, a company with fewer than 500 staff and either turnover of €100m or less or a balance sheet total of €86m or less, with linked and partner enterprises aggregated. Status changes only after the thresholds are crossed in two consecutive years. Covered in outgrowing the SME definition.

State aid. The subsidy control concept the old SME scheme depended on. The current schemes carry no notified State aid machinery, so grants no longer restrict claims, with one exception for Northern Ireland-registered companies claiming ERIS. Explained in is R&D tax relief State aid?

Subcontracted R&D. R&D activity contracted out to a third party. Payments to unconnected subcontractors enter the customer’s claim at 65% of the portion attributable to UK R&D; connected-party payments follow different rules. Covered in can I claim for subcontracted R&D?

Subsidised expenditure. The old rule pushing grant-funded costs out of SME relief. It was abolished for accounting periods beginning on or after 1 April 2024, though much online guidance still describes it as live — corrected in grant funding and R&D tax relief. For old periods still open, the First-tier Tribunal held that payments under ordinary commercial contracts are not subsidies: see Collins Construction and Stage One.

Surrender. Handing a loss to HMRC in exchange for a cash credit rather than carrying it forward against future profits. Under ERIS the surrendered loss is paid at 14.5%, and because the credit does not carry forward, the surrender has to be sized to the PAYE cap before filing. Shown in the worked examples.

Systematic investigation. The method HMRC expects a qualifying project to be able to show: hypothesis, test, result, next iteration, recorded while the work runs. Effort and expense do not amount to a method, and the absence of one was among the failures in the Tanglewood tribunal appeal.

Technical report. The optional narrative document some companies prepare alongside a claim. It is not required — the Additional Information Form is the mandatory one — and it earns its place only where it carries something the form cannot. Weighed up in do I need a technical report?

Two-year amendment window. The period for adding a claim to a return already filed: two years from the end of the period of account. It is not the only gate — a missing claim notification closes a claim the amendment window would otherwise leave open. Covered in how far back can I claim?

Knowing what a term means is not the same as knowing how it applies to your company, and most of the questions worth asking sit in the gap between the two. If a definition here has raised one, talk it through with a chartered adviser, or work through the full R&D tax relief guide.

Sources