Is Your Business Eligible for R&D Tax Relief? A Simple Guide to What Qualifies (and What Doesn’t)

R&D tax relief isn’t just for white lab coats and cutting-edge tech firms. If your business has improved a product, developed software, or tackled a complex challenge – there’s a chance you could be missing out on a valuable tax break.

But how do you know if your project qualifies? And just as importantly, when doesn’t it? Let’s break it down in plain English so you can find out if it’s worth exploring.

Why This Matters

HMRC’s R&D schemes are designed to encourage innovation and they can significantly reduce your Corporation Tax bill or even result in a cash credit. Unfortunately, many small businesses either don’t realise they’re eligible or get caught out by misunderstanding the criteria.

Knowing what qualifies (and what doesn’t) can save you time, reduce your tax liability, and help you avoid rejected claims or unnecessary scrutiny.

The Solution: When R&D Tax Relief Does Apply

R&D tax relief is available to UK limited companies that are trying to make a genuine technological or scientific advancement, especially where there’s no clear or easily available solution.

To be eligible, your business must:

• Be a UK limited company subject to Corporation Tax.

• Be seeking to achieve an advance in overall knowledge or capability in science or technology – not just within your business, but in the wider industry.

• Be tackling uncertainty where a competent professional couldn’t easily work out the solution.

• Be developing or improving a product, process, system, or piece of software.

Projects that may qualify:

• Creating bespoke software to integrate two systems where no existing solution exists.

• Improving manufacturing processes to reduce waste, boost efficiency, or scale sustainably.

• Developing a new material or adapting one for an innovative use, especially where testing and iteration are involved.

Even if your project didn’t succeed, that doesn’t mean it’s ineligible – what matters is the attempt to overcome a real industry wide technical challenge.

When R&D Tax Relief Doesn’t Apply

Just because a project is expensive, complicated, or commercially risky doesn’t mean it qualifies.

Projects that usually don’t qualify:

• Making visual or aesthetic improvements (e.g., updating branding or design).

• Routine website maintenance or installing off-the-shelf software.

• Market research, customer experience testing, or other non-technical development.

• Any work where the solution is obvious or readily available to a competent professional.

• Projects that only improve internal efficiency or use existing knowledge to benefit your own business, without advancing industry-wide capability.

Red flag: If you didn’t face technical uncertainty, your claim likely won’t pass HMRC’s eligibility test.

Expert Tips & Common Pitfalls

Tip: Keep records as you go. Time logs, test results, failed attempts, and technical notes can all help back up your claim if HMRC raises questions.

Pitfall: Don’t assume you’re eligible just because someone told you, “Everyone’s claiming it.” HMRC is increasing its scrutiny of claims, especially unsupported or broad ones. Get proper advice before submitting anything. Better yet, get a second opinion.

Call to Action

Think you might be eligible? Let’s take the guesswork out. Book a quick discovery call with Love Accountancy, and we’ll help you assess your project – clearly, honestly, and without the jargon. Whether you’re already innovating or wondering if a past project counts, we’re here to guide you.

About Love Accountancy

At Love Accountancy, we help small businesses unlock opportunities like R&D tax relief while keeping things simple. As a trusted Exeter Accountant with deep expertise in tax and cloud-based systems, we make it easy to stay compliant, reduce your tax bill, and save time. Whether you’re looking for R&D advice or smarter ways to manage your finances, we’re here to help you grow – effortlessly.