R&D Tax Credits – Documentation, Eligibility, and the New Merged RDEC Scheme

by | Sep 12, 2025 | UK R&D Tax Credits | 0 comments

R&D Tax Credits – Documentation, Eligibility, and the New Merged RDEC Scheme

There have been many changes to the R&D Tax Credit programme over the past 3 years. Below, we set out 3 topics that statistically are of the most interest to our readers. Which include R&D documentation, eligibility and the merged scheme.

The topics are:

  • What documents are required to be kept to support an R&D Tax Credit claim?
  • What industries are eligible to claim R&D Tax Credits?
  • What are the key aspects of the new merged R&D Tax Credit scheme?

These 3 areas affect both SMEs and large companies making it more important than ever to understand how to prepare a successful R&D Tax Credit claim.

Supporting Documentation:

As many companies claiming R&D Tax Credits are well aware. HMRC has been increasing the frequency of compliance checks. HMRC is not just focusing on ensuring each R&D project claimed meets the 3 R&D Tax Credit criteria but also that the R&D work is supported by the appropriate documentation as evidence the work was actually done.

This documentation in not only important to prove the 3 technical eligibility criteria of Technological Uncertainty, Technological Advance and Systematic Investigation are met but also to support the R&D costs being claimed.

A common question that is asked is “Are time sheets required to be kept by staff carrying out R&D activities?”

A reasonable allocation of time incurred by staff on an eligible R&D activity must be made. While detailed time sheets are preferred by HMRC in some cases keeping detailed time sheets is not practical for the business.

If detailed time sheets cannot be kept, having the key technical person allocate the time spent for all staff working on the R&D project once a month should suffice.

To facilitate labour allocation to an R&D project, RDP developed the Innovation Connection Programme (ICP) several years ago. This system provides a simple monthly template. Designed for one person within the company to complete in no more than 20 minutes. The template ensures that R&D documentation is kept up to date throughout the year, making compliance easier and R&D tax credit claims more robust.

In addition, HMRC would like to see other documentation that supports the qualifying R&D work done. This can include:

  • Test results
  • Design documents
  • Code revisions with summaries of iterations
  • Photos or videos of physical prototypes
  • Engineering notes and project reports
  • Internal communications, for example, emails
  • Prototypes and challenges

RDP’s  ICP programme identifies and captures all qualifying R&D projects, activities and costs in real-time throughout the accounting period. Our ICP programme significantly reduces the work that the company’s staff would normally spend to capture R&D work done. This frees up time for the staff to concentrate their efforts on their areas of expertise and spend more time on the company’s productivity and profitability.

Expanding Technology Creates More Opportunity for Industries to Claim R&D Tax Credits

As technology evolves and industries develop and adopt these new technologies, opportunities to claim R&D Tax Credits increase.

For example, 15 years ago we would not have seen many R&D Tax Credit claims in the retail industry. However, now with the popularity of ecommerce retail, companies are developing new marketing platforms through advanced software development. Many are also developing their own AI models.

Other examples of how technology have created new opportunities to claim R&D Tax Credits include:

  • Construction: Innovation in materials, sustainability, modular design, and advanced project management systems. Exploring building automation such as 3D and new civil engineering techniques to construct buildings.
  • Education: Development and use of software, cloud-based systems, e-learning platforms, and AI-driven tools.
  • Food and Drink: Developing new formulations to achieve product stability, taste, texture, manufacturing repeatability and shelf-life.
  • Retail and Fashion: Includes developing new fabrics (like sustainable or smart textiles), creating innovative retail technologies (such as virtual fitting rooms or augmented reality shopping), and improving supply chain logistics using AI and data analytics.
  • Hospitality and Tourism: Software used to monitor guest experiences, optimise operations, and reduce environmental footprints. For example, smart room technology and data-driven customer personalisation tools.
  • Insurance: The insurance industry is increasingly developing software and AI for risk models, predictive analytics tools, and customer service technologies like AI-driven chatbots.
  • Agriculture: Precision farming, genetic engineering, drone technology for monitoring crops and developing climate-resistant crops or eco-friendly pesticides.
  • Professional Services (Legal, Accounting): Even in law and accounting, R&D is growing. Law firms are developing custom legal tech, such as AI for document review and predictive analytics for case outcomes. Similarly, accounting firms may be developing research automation technologies and data analytics tools to improve auditing and compliance.
  • Sports and Athletics: Performance optimisation, wearable technologies to track biometric data, and even innovations in fan engagement through virtual reality or enhanced broadcasting techniques.
  • Entertainment: Explore cutting-edge technologies. This includes virtual and augmented reality, AI-generated content, new streaming technologies, and innovations in special effects (like deepfake technology for movies).

As you can see, there are many industries that are now eligible for the R&D Tax Credit Programme.

This means companies should not dismiss the possibility of making a claim simply because they haven’t qualified before. At RDP Associates, we are here to help. If a business is unsure about the eligibility of their claim, we can usually determine this in a no-obligation call lasting no more than 30 minutes. In addition, if you are an accountant we can review client lists to ensure no opportunities are being missed, helping businesses and advisors alike maximise the benefit of R&D Tax Credits.

The New Merged RDEC Scheme

The merged scheme came into effect on 1st April 2024 and applies to all accounting periods beginning on or after this date. For many companies, this didn’t apply until 2025.

For example, a company with a December year-end would continue to claim under the old SME scheme for its 2024 accounting period. But from 1st January 2025 onwards, it would fall under the new merged RDEC scheme. The programme merged the two schemes, so it should become simpler and have consistency across the board. But companies still need to be aware of different rules within the system.

The effective new merged refundable R&D Tax Credit rate ranges from 15% to 16.2%. Which is significantly lower than the previous SME Tax Credit rate but higher for large companies.

Next to the introduction of the merged RDEC scheme, SMEs can also consider whether they qualify for the Enhanced R&D Intensive Support (ERIS) programme. This is available to SMEs whose qualifying R&D expenditure is at least 30% of total expenditure, including that of any connected companies.

The ERIS programme applies to for loss-making SMEs, as it enables them to earn a refundable Tax Credit equal to 27% of all eligible R&D expenditures. For many early-stage or innovation-driven companies, this relief can provide a vital source of cash flow and reinvestment back into the company.

There are many other changes to the new merged schemes and ERIS. RDP would be happy to answer any questions you have.

What should Companies do now to better prepare themselves?

Forward planning will help companies better prepare for their R&D Tax Credit claim. This can be done by:

  • Documenting R&D activities throughout the year – Don’t leave it until the claim deadline. Our ICP makes this simple for companies.
  • Regularly review your company’s eligibility.
  • Understand the new R&D Tax Credit rules.

With HMRC increasing the frequency of compliance checks, more industries being eligible, and new rules taking effect, the R&D Tax Credit landscape is evolving rapidly. At RDP, we are committed to supporting businesses in adapting, documenting their R&D Tax Credit claims effectively, and maximising the available R&D Tax Relief.

If you have questions about the R&D documentation, eligibility or the merged scheme or any other aspect of R&D Tax Credits, please contact our team at 0208 214 1341 or [email protected] for a discussion.