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R&D tax relief 2025: the big changes you can’t ignore

The R&D tax relief landscape has shifted again – and this time the changes are too big to skim past.

From April 2024, the system moves to a single merged scheme, but new hurdles around overseas spend, admin forms, and HMRC’s tighter compliance stance mean businesses need to adapt quickly.

Here’s your clear, plain-English guide to what changed, what it means, and what to do next.

The headline changes

One merged scheme (plus extra support for R&D-intensive SMEs)

  • From 1 April 2024, the old SME/RDEC split was replaced with a single RDEC-style scheme at a 20% taxable expenditure credit. The SME vs RDEC distinction only remains for periods beginning before that date.
  • ERIS (Enhanced R&D-Intensive Support) remains in place for loss-making SMEs spending at least 30% of total costs on qualifying R&D. This gives:

A 14.5% payable credit on surrenderable losses, and

an additional deduction (bringing the total to 186%).

  • A one-year grace period applies if you dip below 30% after meeting the threshold in the previous year.
  • PAYE/NIC cap still applies: credits you can cash out are capped at £20,000 plus 300% of relevant PAYE & NIC (unless exempt).

Overseas spend and subcontracted R&D

  • From 1 April 2024, overseas subcontractors and externally provided workers (EPWs) are only eligible where the R&D actually happens in the UK.
  • Limited exceptions apply where R&D must be overseas, for example:

    Regulatory or legal requirements
    Environmental/geographical restrictions
    Access to specific facilities
  • EPW costs now have a PAYE/NIC “gateway”, the worker’s earnings must be subject to UK PAYE/Class 1 NIC.
  • Other categories (own staff, consumables, software/data/cloud, clinical volunteers) are not restricted by this rule.
  • Contracted-out R&D: HMRC now focuses on intent. Usually the customer claims if they commissioned the R&D, but contractors may claim where:

The customer is ineligible,

the work wasn’t intended as R&D by the customer, or

the R&D is outside the scope of the customer’s project.

  • Northern Ireland exception: ERIS claims by NI-registered SMEs are not subject to the overseas-spend restrictions (due to state-aid rules).

The paperwork that makes or breaks a claim

  • Additional Information Form (AIF) – Must be filed before (or on the same day as) the CT600. HMRC rejects claims if the CT600 is submitted without it. AIFs must include:
  • A senior internal contact,
  • all agent details,
  • project write-ups, and
  • cost breakdowns.


(Mandatory since August 2023; guidance tightened further in 2024/25.)

  • Claim Notification – For APs beginning on/after 1 April 2023, first-time claimants (or those who last claimed more than 3 years ago) must notify HMRC within 6 months of period end. Miss this and you lose eligibility for that period.
  • Payment condition – As of April 2024, HMRC clarified that all categories of spend must actually be paid before being claimed.

HMRC’s compliance spotlight

HMRC has ramped up its oversight, with more targeted risk-based checks and random enquiries. In 2023/24 alone:

  • 9,700 claims were reviewed (around 17% of all claims).
  • £441m was found to be incorrectly claimed.
  • The illustrative error/fraud rate fell to 7.8% overall (but still 14.6% in the SME scheme).

Alongside this, HMRC has tightened administration with:

  • Mandatory digital claims,
  • Compulsory AIF,
  • A named company officer on claims,
  • Full disclosure of agent identities, and
  • Removal of nominee/assignment payment routes, meaning credits are now paid directly to claimants.
  • The bottom line: scrutiny will remain high.

What this means in practice (your checklist)

  1. Choose your route early – If you’re loss-making and close to the 30% intensity line, compare ERIS vs merged RDEC to see which works best for your cash flow and tax position.
  2. Diary the deadlines – Especially the 6-month pre-notification rule (for new or “out of claim” businesses).
  3. Upgrade contracts & records – Include “where work is done” clauses, confirm EPW PAYE/NIC status, and document why overseas work is essential if it applies.
  4. Write stronger project narratives – Align with BEIS/CIRD tests, showing advance in science/tech, uncertainty, systematic work, and competent professionals. Ensure AIF narratives reconcile with CT600/CT600L.
  5. Plan around the PAYE/NIC cap – Particularly for subcontract-heavy profiles, payroll planning now makes a real difference to outcomes.

Key dates at a glance

  • 1 April 2024 – Merged scheme and overseas/contracted-out rules apply for accounting periods beginning on/after this date.
  • Ongoing – AIF compulsory (file before/same day as CT600).
  • Within 6 months of period end – Claim Notification deadline (if applicable).

How TTRP can help

We support businesses through:

  • Eligibility checks & ERIS vs merged RDEC comparisons,
  • Contract and evidence reviews for overseas/EPW compliance,
  • Building AIF/CT600L and managing notification timelines,
  • Drafting enquiry-ready technical narratives and cost models.

Want this tailored to your sector and year-end? Tell us your accounting period and we’ll map the exact steps and deadlines for you.

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