Initiative overview
The UK’s R&D tax relief system, administered by HM Revenue & Customs, was restructured in April 2024 into a single unified scheme known as the Merged RDEC, which applies to companies of all sizes and sectors. Under this regime, businesses receive a headline 20% “above-the-line” tax credit on qualifying R&D expenditure—covering costs such as staffing, software, cloud computing, data, consumables, and certain subcontracted activities—but because the credit is treated as taxable income, the effective net benefit is typically around 15–16% after tax. A complementary programme, Enhanced R&D Intensive Support (ERIS), targets loss-making small and medium-sized enterprises whose R&D spending exceeds 30% of total costs, offering a more generous combination of enhanced deductions and payable credits that can raise the effective benefit to roughly 27%. Recent updates have also tightened rules around overseas R&D activity and introduced clearer compliance guidance, aiming to simplify the system while focusing support on genuinely innovation-driven companies.
