News & Events
R&D tax relief: What’s changed and what businesses need to know
22nd August 2025
R&D tax relief has always been a valuable incentive, but the pace and volume of changes in recent years has left many businesses wondering where they stand. With HMRC’s latest figures showing rising costs, tougher compliance, and a continued drive to refine the system, we’re finally starting to see signs of stability, but not without a few new complications. Rowleys’ Corporate Tax Assistant Manager, Emily Smith, shares more on the latest updates and what they mean for UK businesses.
Spending and scrutiny are on the increase
One of the headline figures is the rising cost of R&D tax relief. Expenditure has climbed to £8.2 billion for 2024/25, up from £7.7 billion in 2023/24. This continued increase reinforces the importance of ensuring the system is both robust and well-regulated, something HMRC is clearly focused on.
Estimates of error and fraud have been revised downwards, with HMRC now placing the 2023/24 error rate at 6.5%, expected to drop further to 5.9% in 2024/25. That’s a significant reduction from 9.9% (or £759 million) in 2022/23. A key factor? Increased resource: over 500 HMRC staff are now dedicated to R&D enquiries, up from just 100 in 2021/22.
Less doom and gloom
From our perspective on the ground, there’s less doom and gloom than there was 12–18 months ago. While the volume of enquiries initially spiked, many are now being resolved before reaching tribunal. We’re not seeing the same intensity of new enquiries being opened, though we’re still operating on the assumption that around 20% of claims will be subject to enquiry. It feels like we may be settling into a ‘new norm’.
The new R&D tax relief schemes: ERIS and Merged Relief
We’re also now starting to see the first claims being processed under the Merged Scheme and the R&D Intensive Scheme (now known as ERIS). These reforms were intended to simplify the system, but like many simplification efforts, they’ve added their own quirks. One example is the change to subcontracting rules: it now hinges on who ‘initiates’ the R&D – the purchaser or the provider. This is a subtle but crucial distinction, and one that should be documented clearly when making a claim.
There’s also the requirement to notify in advance of making the claim, which seems to be catching some new claimants off guard. For companies with a 31 March year end, the deadline to notify HMRC is 30 September, a key date not to miss.
Too much change, too fast?
The House of Lords recently summed up what many in the industry are feeling:
“Too much change over too short a period can create uncertainty… the number of significant R&D changes in the last 5 years has led to a perception of instability in the UK’s R&D tax relief regime.”
We agree. While it’s right that R&D relief is kept under review to ensure value for the taxpayer, constant change risks undermining confidence in the system. For businesses, this means choosing the right advisor – someone who is up to date with the rules and experienced in navigating their application – is more important than ever.
Final thoughts
R&D tax relief remains a valuable incentive for innovation in the UK, but it’s clear the regime is still evolving. As we settle into the new framework, it’s vital to stay proactive: document decisions clearly, meet notification deadlines, and engage with advisors who are both knowledgeable and pragmatic.
If you’re unsure how the changes might affect your current or future claims, please get in touch, we’re here to help.