The merged R&D tax relief scheme: How much is it worth?

With the introduction of the merged R&D tax relief it is important to understand: what is the real financial benefit for businesses, and how much can companies claim?

What is the merged R&D tax relief scheme worth?

The merged scheme is designed to provide tangible, accessible tax relief to a wide spectrum of UK businesses investing in R&D. By harmonising previous reliefs, the government aims to offer greater clarity on the potential value of claims, ensuring that both SMEs and large companies can better forecast the impact on their finances.

Under the merged scheme, the core benefit is delivered through a taxable credit, rather than an enhanced deduction. The exact amount a business can claim depends on its size, profitability, and the nature of its R&D expenditure. However, the streamlined approach means businesses can now anticipate a consistent value, making financial planning and investment decisions more straightforward.

Calculating the benefit: Key figures and examples

Understanding the financial impact of the merged R&D tax relief to help visualise the benefit let’s walk through a typical claim scenario. This example features a growing SME with £100,000 of qualifying R&D costs with minimal early-stage income:

• Under the merged scheme the company receives a 20% credit, equating to £20,000
• After applying corporation tax of 19%, the net benefit is £16,200
• This results in an effective rate of 16.2%
• If the company qualifies for enhanced support, the net benefit yields £26,970

Looking ahead: Making the most of your claim

To unlock the full value of the merged R&D tax relief scheme, businesses should:

• Confirm the application of the PAYE/NIC cap
• Check through your supply chain to confirm who is eligible to claim
• Review overseas third-party costs to see if they are blocked under these new rules
• Confirm whether you are profit or loss-making to determine the correct level of benefit

With the merged scheme now one of the key parts of the UK’s Innovation Strategy, understanding its worth, and claiming every pound to which you’re entitled, could make all the difference in staying competitive and future ready.

To download the full merged R&D tax relief scheme document, please click here. 

If you wish to discuss this in further detail, please contact one of our Business Tax experts here.