What Qualifies for R&D Tax Credits in the UK and Ireland?

If your business is investing time and money into solving technical problems, developing new processes, or building something that could not be achieved easily using existing knowledge, you may be able to claim R&D tax relief or credits. 

Many businesses still assume this only applies to laboratories or groundbreaking scientific discoveries. In reality, the rules are wider than that in both the UK and Ireland, but they are also more technical and more closely scrutinised than many people expect.

For businesses in England, Scotland, Wales and Northern Ireland, the UK HMRC rules apply. For businesses in the Republic of Ireland, the Irish Revenue rules apply. 

If you operate across borders, the same project can raise different tax questions depending on which entity incurred the cost, where the work was carried out, and which tax system the company falls under. That is why many businesses start by speaking to a team that understands Cross-Border Accounting & Tax before they prepare a claim.

The starting point is not commercial value

A project does not qualify just because it is expensive, important to your business, or commercially ambitious. In the UK, R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology, and the qualifying activities are those that directly contribute to that advance through the resolution of scientific or technological uncertainty. 

Ireland applies a very similar standard. Revenue says the work must involve systematic, investigative or experimental activities in science or technology, seek scientific or technological advancement, and involve resolving uncertainty.

That means straightforward upgrades, routine coding, simple configuration, aesthetic redesign, or work that a competent professional could carry out using established methods will usually not qualify. The real test is whether your team had to overcome technical uncertainty, not whether the project was difficult in a commercial or operational sense. This is often where specialist support from Specialist Tax becomes valuable.

What kind of work can qualify?

Qualifying work often appears in sectors you might expect, such as software, engineering, manufacturing, life sciences and product development. But it can also arise in less obvious sectors where businesses are developing new systems, processes, formulations or methods.

You may have qualifying activity if you are:

• Developing a product or process that required genuine technical experimentation
• Creating software where performance, scalability, data handling or integration could not be solved using standard approaches
• Improving a manufacturing method to overcome precision, speed, quality or waste problems
• Testing materials, prototypes or formulations to resolve technical uncertainty
• Building systems that required advances in engineering or technology rather than routine implementation

What matters most is the technical challenge, not your industry label. A food manufacturer, software firm, engineering company or specialist contractor could all potentially qualify if the underlying work meets the rules. Businesses often review these projects alongside SME Business Solutions and Corporate Finance support when they are planning growth and investment.

What costs can usually be included?

In the UK, HMRC says qualifying expenditure can include categories such as staff costs, subcontractor costs in some cases, externally provided workers, software, data licences, cloud computing, consumable items and certain clinical trial volunteer costs. The exact treatment depends on the scheme, the accounting period and the nature of the relationship between the parties involved.

In Ireland, the company must be within the charge of corporation tax in Ireland, must carry out qualifying R&D activities in Ireland, the EEA or the UK, and the expenditure must not also qualify for a tax deduction in another country. 

The detail around staffing, subcontracting and cross-border costs needs careful review, especially where a group trades in more than one jurisdiction. That is why good record keeping through Digital Bookkeeping and strong oversight through Tax Compliance can make a real difference.

What the current UK rules look like

For accounting periods beginning on or after 1 April 2024, the old SME scheme and old RDEC scheme were replaced for most companies by the merged R&D expenditure credit scheme. HMRC states that the merged scheme provides a taxable expenditure credit at 20%. 

Loss-making R&D-intensive SMEs may instead be eligible for Enhanced R&D Intensive Support, known as ERIS. HMRC says the qualifying expenditure rules for the merged scheme and ERIS are identical, but the credit calculation differs.

HMRC also requires an Additional Information Form before or on the same day as the Company Tax Return, and the form must be submitted first if both are filed on the same day. Some companies must also submit a claim notification form before making a claim, particularly first-time claimants and those who have not claimed recently. Missing these steps can invalidate the claim.

If you are based in Northern Ireland, you still fall within the UK system for R&D tax relief. However, when your group structure, staff, contractors or activities cross the Irish border, the technical details can become more complicated very quickly. This is one area where Internal Audit and External Audit can help strengthen controls and documentation around the claim.

What the current Ireland rules look like

In the Republic of Ireland, Revenue states that qualifying expenditure may attract either the R&D Tax Credit or the R&D Corporation Tax Credit. For accounting periods commencing on or after 1 January 2024, the rate increased from 25% to 30% of qualifying expenditure. Revenue also states that the R&D Corporation Tax Credit is repaid in 3 annual instalments. 

For accounting periods beginning on or after 1 January 2024, first-time claimants and companies that have not claimed in the previous 3 years must file a pre-filing notification at least 90 days before making the claim. That deadline is easy to miss if you only start looking at the claim near the year end or after the accounts are prepared.

If your business works across the UK, Ireland and Northern Ireland, it is important not to assume that one set of rules can simply be copied across to another entity. This is exactly the sort of issue that should be reviewed with Forensics & Investigations where evidence trails matter, and with Recovery & Restructuring if cash flow timing is a concern. 

Common reasons claims go wrong

One of the most common problems is that businesses describe the commercial purpose of the project but do not properly explain the technological uncertainty. Another is poor evidence. 

If you cannot show who worked on the project, what technical obstacles existed, how time was spent, and which costs relate to qualifying activity, the claim becomes much weaker.

Another mistake is assuming that a project failed, so it cannot qualify. That is not correct. Both HMRC and Revenue focus on whether the work sought an advance and involved resolving uncertainty. Success is not the key test.

FAQs

Can software development qualify for R&D tax credits?

Yes, it can. Software projects may qualify if they seek an advance in technology and involve resolving technological uncertainty. Routine builds, ordinary integrations and standard feature work usually do not qualify on their own.

Can a small business claim?

Yes. In the UK, smaller companies can claim under the merged scheme, and some loss-making R&D-intensive SMEs may qualify for ERIS. In Ireland, qualifying companies within the corporation tax system can claim if they meet the conditions.

Does work in Northern Ireland follow Irish or UK rules?

For R&D tax relief, Northern Ireland businesses generally fall under the UK HMRC rules, not the Republic of Ireland Revenue rules. Cross-border groups still need careful analysis where different entities are involved.

Do failed projects still count?

Yes, they can. A project does not need to succeed to qualify. What matters is whether it sought an advance in science or technology and involved resolving real uncertainty. 

Final thoughts

If your business is doing more than routine work and is genuinely trying to overcome technical uncertainty, there may be a valid R&D claim available. The strongest claims are built on clear technical explanations, good records and the right treatment of costs in the correct jurisdiction.

If you want practical advice that works across the UK, Ireland and Northern Ireland, speak to SCC Chartered Accountants. Their team can help you assess whether your work qualifies, structure the claim properly, and reduce the risk of mistakes before anything is submitted.