UK: Guidance on R&D tax relief for small and medium-sized enterprises
Specifically related to R&D intensive SME regime for periods beginning before April 1, 2024
HM Revenue & Customs (HMRC) issued updated guidance regarding the small and medium-sized enterprise (SME) research and development (R&D) tax relief regime.
The guidance specifically relates to the R&D intensive SME regime for periods beginning before April 1, 2024, which allows R&D intensive loss-making claimants to surrender losses for a repayable credit received at a 14.5% rather than the 10% credit rate available to non-R&D intensive claimants.
The updates to the guidance made on October 13 and October 15, 2025, clarify that, for periods beginning before April 1, 2024, claimants will meet the R&D intensity condition if their relevant R&D expenditure is at least 40% of the total expenditure for the claimant (and wider group when applicable).
Further updates also confirm that the “year of grace” only applies to periods beginning on or after April 1, 2024. The year of grace allows claimants that fail to meet the R&D intensity threshold to continue to qualify for the enhanced credit rate where the R&D intensity threshold was met for the previous accounting period.
Prior to these updates the HMRC guidance page outlined an R&D intensity requirement at 30% of the total expenditure and the application of the year’s grace for periods beginning before April 1, 2024. However, both conditions are only applicable to periods beginning on or after April 1, 2024, and the updates to the guidance now reflect this.
The HMRC additional information form portal guidance, however, provided the correct thresholds for periods beginning before April 1, 2024, and the portal would prevent claims where the correct 40% R&D intensity condition was not met.
Read an October 2025 report prepared by the KPMG member firm in the UK