R&D relief and Patent Box are still valuable.
But they are no longer areas where businesses can afford to be casual.
The rules have changed, HMRC’s process is more structured, and many businesses now need better judgement on whether they qualify, what they can claim, and how the claim fits with the wider commercial picture.
If your business is investing in innovation, this matters.
For accounting periods beginning on or after 1 April 2024, the old SME and RDEC R&D schemes were replaced by the merged R&D expenditure credit scheme and Enhanced R&D Intensive Support (ERIS). HMRC says the merged scheme is a taxable expenditure credit at 20%, while ERIS is for loss-making R&D-intensive SMEs and can provide an extra 86% deduction plus a payable credit of up to 14.5% of the surrenderable loss.
Patent Box also remains available. HMRC says companies can elect into Patent Box to apply a 10% Corporation Tax rate to profits from qualifying patented inventions, provided the company is within Corporation Tax, earns profits from exploiting the patented invention, owns or exclusively licenses the patent, and has undertaken qualifying development.
Who this is for
This article is for:
- internationally active UK businesses investing in innovation
- UK subsidiaries involved in R&D activity or holding relevant IP
- finance leaders reviewing whether current claims still make sense
- businesses that want to move from opportunistic claims to better tax oversight
This is not just about getting a claim in.
It is about understanding whether the business is treating innovation tax reliefs properly and whether the wider tax story makes sense.
What has changed on R&D relief
The old “SME versus RDEC” conversation is no longer the starting point for many businesses.
For periods beginning on or after 1 April 2024, the starting point is now:
- the merged R&D scheme, or
- ERIS, if the company is a qualifying loss-making R&D-intensive SME.
That matters because the commercial question is no longer just “how much can we claim?”
It is also:
- which scheme applies
- whether the business really meets the conditions
- whether the claim process has been handled correctly
- whether the underlying projects and costs are well supported
Process now matters much more
A lot of businesses still underestimate this.
HMRC requires an additional information form to support R&D claims, and it must be submitted before or on the same day as the CT600. If both are submitted on the same day, the form has to go first. HMRC states that if the form is not submitted correctly, the claim will not be accepted.
Some businesses also need to submit a claim notification form before claiming. HMRC says this requirement can apply for accounting periods beginning on or after 1 April 2023, particularly for first-time claimants or where the business has not claimed within the relevant prior period.
That means R&D relief is no longer just a technical exercise.
It is also a process discipline exercise.
Where businesses often get this wrong
In practice, the common problems are usually these:
- the company assumes qualifying activity without testing it properly
- cost categories are included too loosely
- the claim process is left too late
- supporting narratives are weak
- the tax analysis is disconnected from what the business actually did
That does not always mean the business is not entitled to relief.
But it does mean the claim may be weaker than management thinks.
Where Patent Box still matters
Patent Box is often overlooked, especially by businesses that focus heavily on the R&D claim and then stop there.
That is a mistake.
If a company has protected innovation and is generating profit from it, Patent Box can still be commercially significant. HMRC’s guidance says the relief is designed to encourage companies to keep and commercialise IP in the UK and that the reduced rate applies to profits from patented inventions and certain other qualifying innovation rights.
The key point is this:
R&D relief and Patent Box are not alternatives.
They can form part of a wider innovation tax strategy, but only if the business understands how its R&D activity, IP ownership, licensing and profit model actually fit together.
What finance leaders should be asking now
A better set of questions is:
- which R&D regime applies to us now?
- are we handling the claim process properly?
- do the projects and costs stand up to review?
- have we looked at Patent Box where relevant?
- does our IP structure still make sense commercially and tax-wise?
These are much better questions than simply:
“Can we claim?”
How TaxFlare helps
TaxFlare supports UK subsidiaries of overseas groups and internationally active UK businesses on the tax issues that sit around innovation, growth and cross-border complexity.
That can include:
- reviewing whether an R&D claim position is robust
- helping finance teams understand which regime now applies
- identifying process risks before submission
- reviewing whether Patent Box should be part of the wider picture
- helping the business connect the tax treatment to the commercial reality
The aim is not to turn every innovative business into a tax project.
It is to make sure the business is getting the benefit it is entitled to, without creating unnecessary risk.
Need a clearer view on R&D relief or Patent Box?
If your business is investing in innovation and wants a clearer, more commercially grounded view of R&D relief, Patent Box or the wider tax position, TaxFlare can help.
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