Research & Development (R&D) Relief – Why Investing Could Have Huge Benefits For Your Business

R&D (Research and Development) is the process of acquiring new knowledge through innovation. Basically, in business it is the activity companies carry out in order to develop or create new products, processes or services, as well as improving on those which already exist. With this development comes risks and additional finances, creating uncertainty in relation to testing the boundaries of technology as well as achieving what was set out in practical terms.

R&D is a key process for businesses who wish to remain competitive, generate profit and be at the top of their respective industries. As well as this, R&D can be claimed as a corporation tax relief, potentially saving businesses huge sums of money. R&D reliefs support companies that work on innovative projects in science and technology and can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.

Often many people think of R&D is for people in white lab coats, however this just isn’t the case. The UK government have recently announced plans to boost private sector investment in R&D across the whole of the UK and create the right conditions for all businesses to innovate so they have the confidence to do so. This will be under the new Innovation Strategy, set out by Business Secretary Kwasi Kwarteng, aiming to cement the UK’s position as a world-leader in science, research and innovation.

We analyse how businesses can use R&D to further their business, and potentially their industry, whilst gaining some valuable incentives which could enhance their profits and reputation.


What Is R&D (Research & Development) & What Does It Cover?

Research & Development (R&D) is the activity in which a business uses to further their innovation into a specific product, service, system, or an improvement to any of these. The work that qualifies for R&D relief must be part of a specific project to make an advancement in science or technology. It cannot be an advancement within a social science, such as economics or a theoretical field such as pure maths.

There are two different types of R&D relief, which considers the size of the company and whether the project has been subcontracted or not. These are SME R&D Relief and Research & Development Expenditure Credit (RDEC).

You can claim SME R&D relief if you’re an SME with:

  • less than 500 staff
  • a turnover of under 100 million euros or a balance sheet total under 86 million euros
  • You may need to include linked companies and partnerships when you work out if you’re a SME.

SME R&D relief allows companies to:

  • deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction.
  • claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss.

Large companies can claim a Research and Development Expenditure Credit (RDEC) for working on R&D projects. It can also be claimed by SMEs and large companies who have been subcontracted to do R&D work by a large company.

The RDEC is a tax credit, it was 11% of your qualifying R&D expenditure up to 31 December 2017. It was increased to:

  • 12% from 1 January 2018 to 31 March 2020
  • 13% from 1 April 2020


What Is The Government’s New Innovation Strategy & How Will It Affect R&D (Research & Development)?

 With plans to put the UK at the forefront of R&D globally, the UK is committed to increasing annual public investment on R&D to a record £22 billion. The private sector also plays a key role in boosting spending on R&D, which is an essential part of the country’s future prosperity and key to achieving key domestic priorities. This ranges from tackling climate change and boosting productivity, to levelling up opportunities across the UK and supporting businesses out of the pandemic.

Through the Innovation Strategy the government will:

  • Increase annual public investment on R&D to a record £22 billion.
  • Ensure government procurement is proactive and supportive, providing a route to market for innovative new products and services.
  • Consult on how regulation can ensure that the UK is well-placed to extract the best value from innovation.
  • Commission the Regulatory Horizons Council to consider how best to support innovation through regulation, including looking whether there are a set of high-level guiding principles for regulation that may apply broadly to any sector of innovation.
  • Introduce new High Potential Individual and Scale-up visa routes and revitalise the innovator route to attract and retain high-skilled, globally mobile innovation talent.
  • Undertake an independent review to assess landscape of UK organisations undertaking all forms of research, development and innovation.
  • Reduce complexity for innovative companies by developing an online finance and innovation hub between Innovate UK and the British Business Bank within the next 12 months.
  • Expand IP education programme for researchers and launch International IP Services to bolster innovative companies’ and researchers’ ability to confidently collaborate, export and invest overseas.
  • Publishing of a new action plan on ‘Standards for the Fourth Industrial Revolution’, promoting standards that enable innovation to flourish.
  • Invest £200 million through the British Business Bank’s Life Sciences Investment Programme to target the growth-stage funding gap faced by UK life science companies.
  • Support 30,000 senior managers of small and medium sized businesses through Help to Grow: Management to boost their business’s performance, resilience, and long-term growth.

Due to the pandemic, there was a decline in business R&D investment, skills gaps and the need for pro-enterprise regulatory environment to spur innovation. To combat this, the government will specify ‘innovation missions’ to set clear direction, urgency and pace on the issues confronting the UK that will be tackled with the private sector in the coming years. These will be determined by the new National Science and Technology Council and supported by the Office for Science and Technology Strategy. The government is also outlining 7 strategic technologies to prioritise and build on the UK’s existing R&D strengths, including clean technologies, robotics, genomics and AI, where the UK has a globally competitive advantage and industrial strength.

Business Secretary, Kwasi Kwarteng, states, “Through this long-term plan, we want to rekindle our country’s flame of innovation and discovery, helping businesses to seize the vast opportunities that innovation can bring. If we get this right, we can build the foundations for the new industries of tomorrow, and ensure British firms are at the front of the pack to turn world-leading science into new products and services that are successful in international markets.”


How To Apply For R&D (Research & Development) Tax Reliefs?

 You can make a claim for R&D relief by entering your enhanced expenditure into the full Company Tax Return form (CT600) before making the claim through HMRC’s dedicated online system. To calculate your enhanced expenditure:

  • Work out the costs that were directly attributable to R&D.
  • Reduce any subcontractor or external staff provider payments to 65% of the original cost.
  • Add all costs together.
  • Multiply the figure by 130% to get the additional deduction to put in to your tax computations.
  • Add this to the original R&D expenditure figure to get the enhanced expenditure figure which you can enter into your tax return.

It will help your claim if you give us a short summary that explains how your project:

  • Looked for an advancement in science or technology and aimed to achieve this advance
  • Had to overcome scientific or technological uncertainty
  • Overcame this uncertainty
  • Could not easily be worked out by a professional in the field

You’ll also need:

  • The start and end dates of the accounting period relating to the R&D activity – these should be the same dates as the period covered by your CT600 return
  • Your 10-digit company unique tax reference (UTR) number
  • The total amount of tax relief you’re claiming
  • A breakdown of your qualifying R&D costs
  • Your unrelieved trading loss for the claim period

If you’ve claimed tax relief on:

  • One to 3 projects, you must include details of all projects
  • 4 or more projects, you must include detailed descriptions on at least 3 to a maximum of 10 projects which between them cover 50% or more of your total qualifying R&D costs


We hope this has outlined to you exactly what R&D is and whether or not your business can look to get involved. If you require any more information on any government schemes or tax reliefs, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.

Beyond Accountancy

At Nordens, we're more than just accountants - we're business experts who can help you achieve your biggest goals.

Nordens Strategic

Our specialist strategic division at Nordens boasts some of the leading entrepreneurial business minds in the country. We cater towards delivering consistent success stories, whilst helping businesses achieve above and beyond their initial goals.

Through highly-tailored guidance, coaching and advice, Nordens Strategic are able to define exactly how your business can reach new levels of success.

Regardless of how you define ‘success’ for your business, our strategic service is guaranteed to bring about real and lasting change. By partnering with some of the UK’s top business coaches, we’ll steer you along the path to a greater future.

Accounting 2 You

Every business, no matter how big or small, needs to make the right decisions, and how to best manage your accounts can put huge question marks over your business. Accounting2You is here to take that pressure off and provide you with all the answers you need.

Our bookkeeping branch offers a fully inclusive, comprehensive service that you can trust. Since 2005, our specialist bookkeepers have been successfully managing the accounting of both individuals and small businesses.

With experts in payroll analysis, credit control and financial recording, Accounting2You will lead your business efficiently, and with real purpose, towards a prosperous future.

Voted as EXCELLENT - 9.9 out of 10 based on 167 reviews

Chris Dyer

Director - Metro Bank

Nordens are always very easy to deal with and extremely professional and efficient. I would have no hesitation in recommending them to my clients for their accountancy needs, no matter how complex they may be.

Read more reviews on Trust Pilot

Jamie Brown

Co-Founder - Chicmi Limited

Very good to work with - the team go above and beyond to make the accounts easy and efficient. They're all super friendly and a joy to work with.

Read more reviews on Trust Pilot

Simon Rose

Director - Rose Opticians

I have been using Nordens Chartered Accountants for 5 years and very happy with the service provided. All members of the team are very knowledgeable and have a wealth of experience which has proved very beneficial to my organisation

Read more reviews on Trust Pilot

Rebecca Bossick

Founder & Director - Physio LDN

Very easy to contact and put me in touch with the right person whenever I need to ask any questions. Extremely knowledgeable and can help me manage my various businesses whenever I need.

Read more reviews on Trust Pilot

James Aconley

Principal - Pauline Quirke Academy

Great accountants, always available to offer advice. The team have transformed my business.

Read more reviews on Trust Pilot

Christopher Wilce

Founder - Dataphone

Having worked with Nordens over the last 5 years, not only to look after my annual accounts but they have also provided outstanding professional advice. They have guided me through a Company share buyback with clear and objective advice. We have also been using Nordens strategic services for a couple of years, which has helped bring about significant improvements that exceeded my expectations. With experience of working with several local accountants over my 29 years in business, I’m very pleased with the service I have received from Nordens.

Read more reviews on Trust Pilot

Dave Hodges

Director - Linekers

Trusted our business with Nordens for over 10 years now and watched the company grow into the successful innovative business it has become today. Deservedly so. Every aspect of financial advice we need is always given promptly and with a smile. We have total confidence in all aspects of advice Nordens give. If you are looking for accountants, its a no brainer!

Read more reviews on Trust Pilot

Tony Charles

Founder - Foundation Sports Limited

A fantastic, modern, vibrant firm that care about the clients and their staff in abundance. It is rare to find an Accountancy firm with such vibrance and focus and relationships. It is no wonder they win award after award in their field.

Read more reviews on Trust Pilot

Peter Horlock

Managing Director - Prime Time Boilers

I have been with Nordens for many years now and they are a great accountants.

Read more reviews on Trust Pilot

Simon Cushing

Founder - Vivid Finishes

We have used Nordens for the last 5 years and have had a great service throughout. The guys are very passionate about what they do and have played a part in the growth of our company, highly recommended.

Read more reviews on Trust Pilot

Andrew Martin

Managing Director - AMD Interior Architecture

Great Service at Nordens from a friendly very approachable team Particularly Kirsty Willis and Joe Sword who have been helping us since we started the business in 2016.

Read more reviews on Trust Pilot

James Robinson

Director - Forma London

Nordens provide a first class service. We moved to Nordens last year and have been impressed with the level of service provided. Keep up the good work!

Read more reviews on Trust Pilot

Latest News

We've always got our ears to the ground when it comes to interesting, useful and topical information relating to business and accountancy.

COVID Loan Fraud &…
Set up in April 2020, the Bounce Back Loan scheme has been considered to be a huge success in helping businesses overcome the perils and decimation that the pandemic had caused. In total, 1.5 million loans (equating to £47bn) w...
The Farming Investment Fund…
Today, the farming and agriculture sector is estimated to be worth £120 billion to the UK economy, whilst employing over four million people. This equates to over 149,000 farm businesses across the UK, however due to the pandem...
Nordens TV

We love making videos that break down convoluted accountancy jargon into plain-talking, actionable and accessible facts.

Nordens Christmas Message 2021
On behalf of everyone here at Nordens, we want to you all a merry Christmas whilst looking back at some of the amazing achievements of the past year. From recruiting new staff, growing our client base, rubberstamping our client...
Live Webinar – Autumn…
The Chancellor of the Exchequer, Rishi Sunak, carried out his briefcase and laid out his Autumn Budget plans on Wednesday 27th October 2021. The Autumn Budget doesn’t usually attract massive attention, however, due to the econo...
  Why I Founded Nordens
Accounting 2 You

In November 2002, having sold our other business interests off earlier in the year, I decided to set up Nordens Chartered Accountants. The easy part was knowing how to do it, as I had established and built a smaller practice a few years earlier. The difficult part, for me, was not following the traditional accountancy path. Having run businesses, both successfully and unsuccessfully, I wanted to help business owners resolve their short term problems and work with them to achieve their longer term goals. Business has always been my interest and I love that I can help business owners achieve what seems like the impossible every single working day.

Mark Norden Signature

Mark Norden

We're Professionally Certified

Our limited company accountants have a range of qualifications from The Institute Of Chartered Accountants (ICAEW) to the Association of Chartered Certified Accountants (ACCA). We worry about the bye-laws, regulations and ethical guidelines of the ACCA so you don’t have to! That makes us an ACCA-accredited employer as well as a Professional Passport-accredited one!