What qualifies as R&D activity for the UK R&D tax credit scheme?

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Qualifying R&D Activity for UK Tax Credits From April 2024, the UK merged the former SME R&D Tax Credit and RDEC (Research and Development Expenditure Credit) schemes into a single merged RDEC scheme, with a separate, enhanced scheme for R&D-intensive loss-making SMEs. In all cases, the definition of qualifying R&D is drawn from the BEIS Guidelines (updated 2023) and the Department for Science, Innovation and Technology guidance. The core test A project qualifies if it: 1. Seeks to make an advance in science or technology (not arts, humanities or social sciences) 2. Overcomes scientific or technological uncertainty -- meaning a competent professional could not simply look up the answer in existing publicly available knowledge 3. Is conducted systematically -- using an investigative approach with records Advance must be in the overall field, not just new to your business. If a standard technique is new to your company but well understood in the industry, it does not qualify. What counts as qualifying activities - Designing and testing new or improved products, processes, materials or services - Software development where technical challenges are resolved (e.g. performance at scale, novel algorithms) - Resolving integration difficulties between systems when no known solution exists - Developing proprietary tools or processes to solve a defined technical problem What does NOT qualify - Routine testing or quality control with predictable outcomes - Cosmetic or aesthetic improvements without technical advance - Market research, feasibility studies without technical work - Work to replicate something already in the public domain - Clinical trials that follow established protocols without technical innovation Eligible costs Once R&D activity is established, qualifying expenditure includes: - Staff costs (salary, employer NI, pension contributions) - Subcontractor and externally provided worker costs (at 65% for most) - Consumable materials used in R&D - Software licenses directly used in R&D - Data and cloud computing costs (from April 2023 onwards) - Clinical trial volunteer costs Claiming under the merged scheme Under the merged scheme (projects starting after April 2024), the RDEC rate is 20% above-the-line credit, giving an effective benefit of approximately 15% after Corporation Tax for profitable companies. Loss-making R&D-intensive SMEs (R&D spend at least 30% of total expenditure) access an enhanced scheme at a higher rate. All claims must now be accompanied by a claim notification (if first claim or gap of over a year) and a supporting Additional Information Form submitted online before the CT return. HMRC scrutiny has intensified since 2022. Detailed technical narratives, signed by a senior officer, are essential for compliance.