The UK government is currently running a consultation on Research and Development (R&D) tax credits, which was designed to support innovation across industries; this consultation could affect how companies claim valuable tax relief in the future.
What are R&D Tax Credits?
R&D tax credits are a form of government support to encourage companies to invest in innovation. If a company is developing new products, services, or processes—or improving existing ones—it may be able to claim back a portion of its costs through reduced taxes or even a cash payment. This applies across a range of industries, from tech to agriculture, manufacturing to healthcare.
Why has a consultation been launched?
The R&D tax credit system has become increasingly popular, but also increasingly complex. The government has raised concerns about:
• Fraud and abuse of the system by a small minority.
• Inconsistencies in how claims are submitted and reviewed.
• The need to modernise the scheme to reflect today’s R&D practices, especially in areas like software and cloud computing.
As a result, HMRC and the Treasury are consulting with businesses, tax professionals, and the public to gather feedback and help shape a fairer, more effective system.
What changes are being considered?
Although the full outcome is yet to be decided, the consultation is exploring:
• Simplifying the process to make it easier for legitimate companies to claim.
• Strengthening compliance checks to reduce fraud.
• Clarifying definitions of what qualifies as R&D, especially for newer industries.
• Combining the two existing schemes (one for SMEs and one for larger companies) into a single system.
How could this help companies?
For companies that genuinely invest in innovation, a well-designed system could mean:
• Faster claims with less paperwork.
• More clarity about what qualifies for relief.
• Greater support for emerging sectors and digital technologies.
In short, this could be a boost for UK companies looking to stay competitive and creative.
What do claimants need to do?
If your company currently claims—or is thinking about claiming—R&D tax relief, here’s what you should do:
1. Stay informed: Keep an eye on announcements from HMRC and industry bodies. The consultation is open until 26 May 2025, and updates will follow.
2. Review your current claims: Make sure your documentation is strong and your projects genuinely meet HMRC’s criteria.
3. Consider giving feedback: If you have views on how the system could be improved, you can contribute to the consultation via the government website.
4. Work with qualified advisors: A good tax advisor or accountant can help you navigate the changes and ensure your claims are compliant.
In summary
The R&D tax credits consultation is about making innovation support better, fairer, and fit for the future. If you run a company that develops new ideas or solves technical problems, this could have a direct impact on your bottom line. By understanding the consultation and preparing now, companies can make sure they’re ready for whatever changes come next.