It’s been hard work being an R&D Tax Credit advisor over the last few years, and many of us have become used to avoiding questions over what we do for a living for fear of being identified as someone who helps swindle the taxpayer out of billions of pounds.
The sector has undoubtedly become tainted by abuse and stories of the outlandish projects being put forward as R&D, with the latest being featured in the Times last week as Dundee United football club were found to have claimed for 24% of their players’ salaries.
But beneath the doom-and-gloom, there are definitely signs that things are improving and that R&D Tax Credits are beginning to re-emerge as a positive force for the UK economy.
Here are my 10 reasons to be more positive about the UK R&D Tax Credit regime in 2025.
1. The Chancellor has committed to the scheme
Let’s start with the obvious: we still have an R&D scheme.
After an estimated £10 billion in taxpayer losses due to fraud and error since its inception, the fact that the scheme is still largely intact is a win in itself.
At the International Investment Summit in October 2024, Chancellor Rachel Reeves confirmed there would be no change to the R&D Tax Credit rates, stating that:
“We will maintain the current rates for the research and development reliefs, which provide generous support for innovation.”
This commitment signals a clear intention to keep R&D Tax Credit as part of the UK’s long-term economic strategy.
Barring a major reversal, the merged RDEC scheme and the enhanced R&D intensive support (ERIS) scheme are expected to remain stable for the remainder of this Parliament, likely until 2028 or 2029.
2. The scheme is actually growing
Despite widespread pessimism, HMRC’s latest annual report confirms that total expenditure on R&D tax reliefs during 2024-25 reached £8.2 billion, an increase from £7.7 billion the year before.
This is a 6.5% increase year-on-year, equivalent to £500m in total support.
Given the recent publicity around fraud, crackdowns, pre-notification hurdles and cowboy advisors, many expected claim values to fall off a cliff. Instead, we’ve seen the opposite.
It’s a clear sign that, despite recent reforms, the scheme continues to play a valuable role in supporting innovation across the UK.
3. R&D support for early-stage companies remains generous
While the effective R&D benefit rate for loss-making SMEs has fallen from 33.35% to 27% under the new R&D intensive scheme (ERIS), it still represents a strong level of support for early-stage companies.
A 27% cash benefit on eligible R&D costs remains highly competitive internationally, particularly when compared to the US.
4. Taxpayer losses are down
The persistent levels of fraud and error that have tainted the R&D scheme in recent years are finally starting to fall.
According to HMRC’s latest annual report, estimated error and fraud fell to £759 million in 2022-23, a £578 million reduction compared to the previous year.
HMRC estimates that reforms to the SME scheme alone cut error and fraud by £551 million between 2021-22 and 2022-23.
5. The cowboy advisors are being weeded out
The R&D Tax Credit “gold rush” is well and truly over, which is a good thing, as the exodus of low-quality, aggressive advisors from the R&D advisory market has begun to have a positive impact.
HMRC’s recent reforms have made it much harder to file a claim without robust supporting evidence. With the Additional Information Form now mandatory, the old trick of submitting vague (or even no) technical narratives is no longer possible.
The requirement for new claimants to notify HMRC of the intention to file an R&D claim within six months of a year end has stripped the “boiler room” sales operations of the ability to persuade unsuspecting companies that they were doing R&D all along, even though they didn’t realise it, and to make claims for R&D activity done up to three years ago.
Mercifully, cold calling has collapsed, and LinkedIn spam and email bombardment are declining too, as most R&D firms back away from aggressive outreach. This can only be good for the sector’s reputation.
6. The R&D advisory industry is now self-policing
In the continued absence of formal regulation, many R&D advisors have taken steps to improve the industry from within by challenging abuse and encouraging others to adopt a more rigorous and professional approach.
This form of self-policing has already had an impact, with some firms choosing to professionalise or withdraw from the market altogether.
It is a cautious but important step towards rebuilding trust in the R&D advisory sector.
7. HMRC are (slowly) improving their enquiry process
There’s still a long way to go, but we are perhaps seeing some signs of improvement in how HMRC handles R&D Tax Credit enquiries.
LinkedIn is now awash with R&D advisors boasting about resolving compliance checks for their clients. These posts are almost always followed up with offers to assist other claimants in the same way, which is a sure sign that enquiry numbers are dropping across the board.
Admittedly, this could just be HMRC clearing the decks of older cases ahead of a new wave of enquiries, but let’s take it as a win for now.
8. HMRC is meeting its R&D claim processing targets
Despite current anecdotal evidence of a slowdown in processing some R&D claims, HMRC’s official position is that it exceeded its published aim to process 85% of claims within 40 days during 2024–25 and is now achieving a rate of 90%.
Compared with a period of several months in 2022 when HMRC temporarily suspended payments of all R&D Tax Credit claims, this has to be seen as a sign of progress.
9. The scheme is becoming simpler and more predictable
One of the under-appreciated benefits of the new merged RDEC scheme is the increased clarity it brings to forecasting. Under the old SME regime, the level of R&D support often depended on a company’s profit or loss position which made it difficult to know the actual benefit rate until after year-end.
Now, with a relatively stable effective rate of 15% to 16.2% for most claimants, companies can estimate the value of their R&D claim with far greater confidence. That makes budgeting and investment planning easier and reduces the guesswork for claimants.
10. Cloud hosting and data costs are now eligible
One of the more positive recent changes to the R&D regime is the inclusion of cloud computing and data acquisition costs, two areas that were previously excluded under the old rules.
These changes bring the scheme more in line with how modern R&D is actually carried out, particularly in sectors such as software, AI and data science. Until recently, companies investing heavily in cloud infrastructure or purchasing datasets were unable to claim for these core elements of their R&D activity.
What does everyone else think about my list? Have I missed anything?
Please let me know in the comments.
Article written by Rufus Meakin
Rufus Meakin works with tech companies to help ensure their R&D Tax Credit claims are accurate and defendable.
If you would like to discuss any aspect of your R&D Tax Credit claim, then please feel free to book an exploratory call here: https://calendly.com/rufusmeakin-uk/r-d-tax-credits-exploratory-call
