R&D Tax
How to claim startup R&D tax credits: step-by-step guide
Introduction
R&D tax credits are one of the most valuable incentives available to UK startups, allowing companies to recover a portion of their innovation costs through a **cash credit** or a **corporation tax reduction**. However, many founders find the claims process confusing, and **errors can lead to delays, reduced claims, or HMRC investigations**.
With the **April 2024 updates**, R&D tax relief now falls under two schemes:
The Merged Scheme – The standard scheme most startups will claim under.
The Enhanced R&D Intensive Support (ERIS) Scheme – For companies where R&D spending makes up at least 30% of total costs, offering a higher level of relief.
In this guide, we’ll break down **each step of the R&D claims process**, ensuring your startup maximises its entitlement while avoiding costly mistakes.
In this guide, we’ll cover:
Who needs to submit an Advanced Notification
The step-by-step process of preparing and submitting a claim
What documentation and reports are required
Common claim mistakes to avoid
Step 1: Determine If You Need to Submit an Advanced Notification
**New for 2024** – Certain companies must submit an Advanced Notification to HMRC to indicate their intent to claim R&D tax credits.
**Who Needs to Notify?**
First-time R&D claimants.
Companies that haven’t claimed R&D tax relief in the last three accounting periods.
The notification must be submitted **within six months after the end of the accounting period** in which the claim will be made. **Failure to submit on time means you won’t be able to claim R&D relief for that period.**
Step 2: Identify Qualifying R&D Projects
HMRC defines R&D as work that seeks to make an advance in science or technology and resolves **technical uncertainty**.
Your project may qualify if:
It attempts to develop new or significantly improved products, processes, or services.
The solution is not readily available in the industry.
The project involves **experimentation, testing, or problem-solving**.
It is carried out in the **UK** (unless exceptional criteria are met).
**Tip:** Even if your project **failed**, you may still claim relief as long as the work sought to resolve **technical uncertainty**.
Step 3: Gather Financial Records
Next, you’ll need to track all **R&D-related costs**, ensuring expenses fit within HMRC’s cost categories:
Eligible Cost Categories:
**Staff Costs** – Salaries, employer NIC, and pensions for employees engaged in R&D.
**Externally Provided Workers (EPWs)** – Payments to third-party workers **not on payroll** but engaged in R&D.
**Contracted Out R&D** – UK-based subcontractor costs (overseas R&D is only eligible in **exceptional cases**).
**Software & Cloud Computing Costs** – Directly used in R&D activities.
**Consumables** – Materials, prototypes, and utilities used for R&D.
Common Mistake: Many startups **underclaim** because they fail to track R&D expenses accurately.
Step 4: Complete the Additional Information Form
**New for 2024** – Every R&D tax credit claim must now be accompanied by an **Additional Information Form** before submitting a corporation tax return.
What the Additional Information Form Includes:
A breakdown of R&D costs by category.
A description of the qualifying R&D activities.
The name of the **main technical expert(s)** involved in the project.
The company's contact details for HMRC queries.
**Failing to submit this form before your tax return will result in HMRC rejecting your claim.**
Step 5: Prepare a Technical Report
The technical report should explain:
The **scientific or technological advance** your project aimed to achieve.
The **uncertainties you faced** and how they were addressed.
The **experiments, testing, or development processes** undertaken.
**Common Mistake:** Submitting a claim without a well-structured technical report **increases the risk of HMRC scrutiny**.
Step 6: Submit the Claim with Your CT600 Tax Return
Once your financial breakdown and technical report are complete:
Include the claim in your **company’s corporation tax return (CT600)**.
Submit the **Additional Information Form** before filing your return.
Claims are typically processed within **6-12 weeks**.
Common Claim Mistakes That Could Cost You
**Not submitting an Advanced Notification** – If required, missing this step makes your company ineligible to claim.
**Lack of documentation** – HMRC expects detailed reports and accurate financial records.
**Claiming ineligible expenses** – Sales, marketing, and routine software development **do not count as R&D**.
**Overclaiming on subcontractor costs** – Only **UK-based** contracted R&D is eligible (except in rare cases).
How Startup CFO Can Help
Making an R&D tax credit claim is **complex**, and mistakes can lead to **delays or reduced payouts**. At Startup CFO, we help founders **maximise their claims while staying fully compliant**.
Our Services for Startups
**R&D tax credit claim preparation** – Ensure you claim the maximum relief available.
**Technical report drafting** – Avoid HMRC scrutiny with a structured and compliant report.
**Compliance & audit support** – If HMRC challenges your claim, we handle the response.
Introduction
R&D tax credits are one of the most valuable incentives available to UK startups, allowing companies to recover a portion of their innovation costs through a **cash credit** or a **corporation tax reduction**. However, many founders find the claims process confusing, and **errors can lead to delays, reduced claims, or HMRC investigations**.
With the **April 2024 updates**, R&D tax relief now falls under two schemes:
The Merged Scheme – The standard scheme most startups will claim under.
The Enhanced R&D Intensive Support (ERIS) Scheme – For companies where R&D spending makes up at least 30% of total costs, offering a higher level of relief.
In this guide, we’ll break down **each step of the R&D claims process**, ensuring your startup maximises its entitlement while avoiding costly mistakes.
In this guide, we’ll cover:
Who needs to submit an Advanced Notification
The step-by-step process of preparing and submitting a claim
What documentation and reports are required
Common claim mistakes to avoid
Step 1: Determine If You Need to Submit an Advanced Notification
**New for 2024** – Certain companies must submit an Advanced Notification to HMRC to indicate their intent to claim R&D tax credits.
**Who Needs to Notify?**
First-time R&D claimants.
Companies that haven’t claimed R&D tax relief in the last three accounting periods.
The notification must be submitted **within six months after the end of the accounting period** in which the claim will be made. **Failure to submit on time means you won’t be able to claim R&D relief for that period.**
Step 2: Identify Qualifying R&D Projects
HMRC defines R&D as work that seeks to make an advance in science or technology and resolves **technical uncertainty**.
Your project may qualify if:
It attempts to develop new or significantly improved products, processes, or services.
The solution is not readily available in the industry.
The project involves **experimentation, testing, or problem-solving**.
It is carried out in the **UK** (unless exceptional criteria are met).
**Tip:** Even if your project **failed**, you may still claim relief as long as the work sought to resolve **technical uncertainty**.
Step 3: Gather Financial Records
Next, you’ll need to track all **R&D-related costs**, ensuring expenses fit within HMRC’s cost categories:
Eligible Cost Categories:
**Staff Costs** – Salaries, employer NIC, and pensions for employees engaged in R&D.
**Externally Provided Workers (EPWs)** – Payments to third-party workers **not on payroll** but engaged in R&D.
**Contracted Out R&D** – UK-based subcontractor costs (overseas R&D is only eligible in **exceptional cases**).
**Software & Cloud Computing Costs** – Directly used in R&D activities.
**Consumables** – Materials, prototypes, and utilities used for R&D.
Common Mistake: Many startups **underclaim** because they fail to track R&D expenses accurately.
Step 4: Complete the Additional Information Form
**New for 2024** – Every R&D tax credit claim must now be accompanied by an **Additional Information Form** before submitting a corporation tax return.
What the Additional Information Form Includes:
A breakdown of R&D costs by category.
A description of the qualifying R&D activities.
The name of the **main technical expert(s)** involved in the project.
The company's contact details for HMRC queries.
**Failing to submit this form before your tax return will result in HMRC rejecting your claim.**
Step 5: Prepare a Technical Report
The technical report should explain:
The **scientific or technological advance** your project aimed to achieve.
The **uncertainties you faced** and how they were addressed.
The **experiments, testing, or development processes** undertaken.
**Common Mistake:** Submitting a claim without a well-structured technical report **increases the risk of HMRC scrutiny**.
Step 6: Submit the Claim with Your CT600 Tax Return
Once your financial breakdown and technical report are complete:
Include the claim in your **company’s corporation tax return (CT600)**.
Submit the **Additional Information Form** before filing your return.
Claims are typically processed within **6-12 weeks**.
Common Claim Mistakes That Could Cost You
**Not submitting an Advanced Notification** – If required, missing this step makes your company ineligible to claim.
**Lack of documentation** – HMRC expects detailed reports and accurate financial records.
**Claiming ineligible expenses** – Sales, marketing, and routine software development **do not count as R&D**.
**Overclaiming on subcontractor costs** – Only **UK-based** contracted R&D is eligible (except in rare cases).
How Startup CFO Can Help
Making an R&D tax credit claim is **complex**, and mistakes can lead to **delays or reduced payouts**. At Startup CFO, we help founders **maximise their claims while staying fully compliant**.
Our Services for Startups
**R&D tax credit claim preparation** – Ensure you claim the maximum relief available.
**Technical report drafting** – Avoid HMRC scrutiny with a structured and compliant report.
**Compliance & audit support** – If HMRC challenges your claim, we handle the response.
Get step-by-step help with your R&D claim.
don't risk getting your R&D claim wrong—errors can lead to delays or rejections. Book a consultation today to get expert support with your submission.