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

If you are investing in innovation, developing new products, improving processes or solving technical problems, there is a good chance you could be carrying out qualifying research and development activity without realising it.

R&D tax relief is one of the most valuable incentives available to companies in both the UK and Ireland, yet it is often misunderstood. Many business owners assume it is only for scientists in laboratories or large technology firms. In reality, it can apply across a much wider range of sectors, provided the work involves genuine scientific or technological uncertainty.

This article walks you through how R&D tax credits work in both jurisdictions, what kinds of activity may qualify, and what you need to do to make a claim.

What are R&D tax credits?

R&D tax credits are government incentives designed to reward companies that invest in innovation. In the UK, the regime is administered by HMRC. In Ireland, it is administered by Revenue. Both systems are designed to reduce the cost of research and development by allowing qualifying companies to claim relief on eligible expenditure.

Depending on the scheme, the benefit may reduce your corporation tax liability or, in some cases, result in a payable credit. For many SMEs, this can mean thousands, or even tens of thousands, of pounds or euros retained in the business each year. It is not a grant in the traditional sense, but the cash flow impact can still be significant.

As chartered accountants in Northern Ireland with dual-jurisdiction experience in both UK and Irish tax, SCC Chartered Accountants works with businesses across both jurisdictions to identify qualifying activity and prepare robust claims.

How the UK scheme works

The UK R&D relief landscape changed significantly for accounting periods beginning on or after 1 April 2024. The previous SME scheme and the Research and Development Expenditure Credit scheme were replaced for most companies by a merged R&D expenditure credit scheme. There is also separate Enhanced R&D Intensive Support, often referred to as ERIS, for certain loss-making R&D-intensive SMEs.

Under the merged scheme, companies can claim a taxable expenditure credit at a rate of 20% on qualifying R&D expenditure. This credit is brought into account as taxable income, so the net benefit depends on the company’s corporation tax position.

For loss-making R&D-intensive SMEs, ERIS can provide a more generous outcome. To meet the R&D intensity condition for accounting periods beginning on or after 1 April 2024, qualifying R&D expenditure must generally be at least 30% of total relevant expenditure. Where the conditions are met, a company may be able to claim an additional deduction of 86% and a payable tax credit of up to 14.5% of the surrenderable loss.

There are also important rules around PAYE caps, overseas expenditure, subcontracted R&D, externally provided workers and Northern Ireland companies claiming ERIS. This means it is important to look at the detail before assuming which route applies.

Qualifying UK expenditure can include staff costs, employer’s National Insurance and pension contributions, externally provided workers, software, data licences, cloud computing costs, consumables, subcontracted R&D in certain circumstances, and payments to clinical trial volunteers. The expenditure must relate to a project that seeks to achieve an advance in science or technology and must involve resolving genuine scientific or technological uncertainty.

How the Irish scheme works

In Ireland, the R&D Corporation Tax Credit also provides valuable support for qualifying companies. For accounting periods commencing on or after 1 January 2024, the credit is generally calculated at 30% of qualifying R&D expenditure. For accounting periods with a specified return date on or after 23 September 2027, the rate increases to 35%, which will generally apply to accounting periods ending on 31 December 2026 or later.

Ireland’s R&D corporation tax credit is calculated on a volume basis, which means it applies to qualifying expenditure rather than only to incremental year-on-year increases.

The credit is not automatically offset against corporation tax in the same way as older rules. A company must elect whether instalments are treated as an overpayment for offset against tax liabilities or repaid by Revenue. The credit is generally paid in 3 annual instalments, although the first-year amount may be accelerated depending on the value of the claim and the relevant accounting period.

For accounting periods beginning on or after 1 January 2024, companies claiming the Irish R&D credit for the first time, or companies that have not claimed in the previous 3 years, must notify Revenue in advance of making the claim.

Qualifying expenditure can include staff costs, materials, certain overheads, plant and machinery, buildings used for R&D, and subcontracted activity, subject to the detailed Irish rules. The activity must be systematic, investigative or experimental, and must seek to achieve scientific or technological advancement.

What kinds of activity actually qualify?

This is where many businesses get stuck. When people hear “R&D,” they often picture white coats and laboratory equipment. But both HMRC and Revenue recognise that qualifying R&D can happen in many sectors.

In practice, qualifying R&D activity might include:

• Developing new software where the challenges involved are not solvable using existing knowledge, such as building a custom platform, algorithm or system architecture that requires novel problem-solving.
• Engineering or manufacturing innovation, such as improving a production process, developing a new material or finding a way to make a product work more efficiently.
• Food and drink development, such as reformulating products to achieve a specific taste, texture, shelf life or nutritional outcome where the answer is not readily available.
• Construction and civil engineering projects involving new building methods, materials or structural solutions to overcome specific technical challenges.
• Environmental and sustainability innovation, such as developing cleaner processes, reducing emissions, improving energy efficiency or creating lower-impact materials.
• Healthcare and life sciences work, including the development of new treatments, diagnostics, medical devices or technical processes.

The key test in both jurisdictions is whether the project involved genuine scientific or technological uncertainty. If the answer was obvious, already known or easily available to a competent professional in the field, it is unlikely to qualify. But if your team had to investigate, test, fail, adapt and solve a technical problem where the outcome was uncertain, that may be a strong starting point.

Our specialist tax team includes advisers with experience across both the UK and Ireland, and they work closely with clients to identify qualifying projects, including activity that owners did not initially realise could form part of a claim.

What costs can you claim?

Once you have identified qualifying projects, the next step is identifying the eligible costs associated with them. The exact rules differ between the UK and Ireland, but common categories may include:

• Staff costs, including wages and relevant employer contributions for employees directly involved in qualifying R&D activity, plus an appropriate proportion of supervisory or support staff time.
• Subcontractors and freelancers, where external parties carry out qualifying R&D on your behalf, subject to the specific rules in each jurisdiction.
• Externally provided workers, such as agency staff working on qualifying R&D projects.
• Software, data licences and cloud computing costs used directly in qualifying R&D activity, subject to the relevant UK or Irish rules.
• Consumables, including materials and utilities used or transformed during the R&D process.
• Plant, machinery and buildings in Ireland, where they are used for qualifying R&D activity and the conditions are met.

Good records are essential. You should keep evidence of the technical uncertainties, the work carried out, the time spent by staff, the costs incurred, and how those costs relate to qualifying activity. This is particularly important because both HMRC and Revenue can review claims and ask for further evidence.

Given the complexity of record-keeping and the technical nature of claim preparation, working with experienced advisers can make a real difference, both in maximising what you can claim and ensuring your claim is defensible. You can read more about how tax accountants help small businesses get the most from reliefs like these throughout the year.

Cross-border considerations

If your business operates across both the UK and Ireland, as many Northern Ireland-based companies do, you may be able to access R&D relief in one or both jurisdictions depending on where the company is tax resident, where the qualifying activity takes place, how the costs are incurred, and which entity bears the risk and expenditure.

This is an area where cross-border tax accounting expertise is genuinely valuable. The interaction between the UK and Irish R&D regimes, the treatment of costs incurred on both sides of the border, overseas expenditure rules, subcontracting arrangements and the need to avoid double-counting all require careful planning.

Getting this right can help maximise your entitlement while keeping the claim compliant. Getting it wrong can create an invalid claim, a reduced benefit or a compliance issue.

Our article on tax planning for UK businesses expanding overseas gives broader context for how the two systems can interact, and our piece on VAT compliance for businesses operating across the UK–Ireland border is also relevant if you are managing obligations in both jurisdictions.

R&D credits and your wider tax position

R&D claims do not sit in isolation. They interact with your broader tax position and should be part of a joined-up approach to tax planning.

For example, the Patent Box regime in the UK allows qualifying companies to apply an effective 10% corporation tax rate to profits attributable to patented inventions and certain other qualifying intellectual property. This can often be relevant where innovation activity also gives rise to R&D claims.

Similarly, Ireland’s Knowledge Development Box provides preferential tax treatment for income from qualifying intellectual property. For companies that carry out R&D and generate valuable IP, this may be worth considering alongside R&D relief.

Capital allowances are another area to review, particularly for businesses investing in plant, machinery, specialist equipment or facilities as part of their innovation programmes.

Our digital bookkeeping service also plays a role here. Accurate, up-to-date financial records throughout the year make it much easier to identify and evidence R&D expenditure. If you are still working from manual records, it can be much harder to extract the cost data you need when preparing a claim. Read more about Making Tax Digital and what it means for your business to understand why digital records are becoming increasingly important.

What if your claim is challenged?

HMRC has increased its scrutiny of R&D claims in recent years following concerns about error and fraud in the system. This means UK claims need to be technically sound, well-evidenced and clearly documented. Revenue in Ireland also expects claims to meet the relevant statutory tests and record-keeping requirements.

In the UK, companies must submit an Additional Information Form before making an R&D claim. Some companies must also submit a claim notification form in advance, particularly first-time claimants or those that have not claimed recently. Missing these steps can make a claim invalid.

If you ever find yourself in a position where the integrity of your financial records is in question, whether through an HMRC enquiry, a Revenue review, a dispute or concerns about how costs have been reported, forensic accountants UK can provide specialist support. Our forensics and investigations team produces detailed reports and can provide expert witness support if matters escalate to a formal dispute.

And if your business is under financial pressure for any reason, it is worth knowing that company recovery accountants can help you stabilise the position and explore your options, including whether unclaimed tax reliefs such as R&D credits could form part of a wider recovery plan.

What about sustainability-related R&D?

One growing area of R&D activity for SMEs is innovation connected to sustainability and environmental goals. This might include developing cleaner processes, reducing energy consumption, improving materials, reducing waste, or creating products with a lower environmental impact.

This type of work can qualify under the UK or Irish R&D regimes where it involves a genuine scientific or technological advance and the project addresses uncertainty that cannot be readily resolved by a competent professional in the field.

It may also be relevant to your wider sustainability and ESG reporting obligations. If you are investing in this kind of innovation, it is worth making sure your R&D claims, tax planning and ESG strategy are aligned.

Our SME Business Solutions team can help you see the bigger picture and ensure all the pieces are working together.

Frequently asked questions

Do I need to be a technology company to claim R&D tax credits?
No. R&D tax relief can apply to companies across many sectors, including food production, construction, manufacturing, engineering, software, healthcare, environmental services and professional services. The test is not whether you consider yourself a technology company. The test is whether your project involved a genuine scientific or technological advance and uncertainty.

Can I make a backdated R&D claim?
In the UK, companies can generally amend a corporation tax return within 2 years of the end of the relevant accounting period, but claim notification and additional information requirements must also be considered. In Ireland, claims must generally be made within 12 months of the end of the accounting period. You should take advice early to confirm whether a prior-period claim is still possible.

What if my R&D project did not succeed?
A failed project can still qualify. In fact, the fact that the outcome was uncertain may support the argument that genuine R&D was taking place. What matters is whether the project sought to resolve scientific or technological uncertainty, not whether it achieved the commercial result you hoped for.

How long does it take to receive a payment?
In the UK, HMRC aims to pay 85% of payable R&D tax credits, or contact the company about the claim, within 40 days. This is not a guarantee, and claims may take longer if further information or a compliance check is required. In Ireland, the R&D Corporation Tax Credit is generally repaid in 3 annual instalments, although the first instalment may be accelerated depending on the claim value and accounting period.

Do I need specialist advisers to make a claim?
You are not legally required to use an adviser, but R&D claims are technical and are subject to increasing scrutiny. A strong claim needs both financial accuracy and a clear explanation of the scientific or technological uncertainty involved. Working with advisers who understand both the technical and tax aspects of R&D can help reduce risk and ensure you do not miss qualifying costs.

Do not leave money on the table

R&D tax credits represent real value for innovative businesses. The benefit can be reinvested into further growth, used to improve cash flow or retained in the business. Too many SMEs miss out because they do not realise they qualify, or because they do not have the right support to prepare a strong claim.

At SCC Chartered Accountants, our specialist tax team has the dual-jurisdiction expertise to identify qualifying activity, calculate eligible costs and prepare claims that are technically robust and compliant. We work with businesses across Northern Ireland, the UK and Ireland to make sure you are claiming what you are entitled to while staying on the right side of the rules.

Get in touch today to find out whether your business could be making an R&D tax credit claim.