Worked Examples
Example: R&D Claim Under the Merged Scheme
A worked example of an R&D claim under the merged scheme for a profitable SME developing a machine-learning fraud detection algorithm. We compute the qualifying spend, the 20% credit and the net Corporation Tax saving.
Quick answers
How much is an R&D claim worth in 2025/26?
Under the merged scheme, the credit is 20% of qualifying spend (above-the-line), giving a net Corporation Tax saving of about 15% for profitable companies on the 25% main rate. Loss-making R&D-intensive SMEs can use ERIS for ~27p per £1 of qualifying spend.
Scenario
FraudShield Ltd is a profitable UK SME with a 31 March 2026 year-end (so the merged scheme applies). It spent the year building a real-time machine-learning fraud detection engine — a project that meets the BEIS definition of R&D because the team had to resolve genuine technological uncertainty about model latency at scale.
Profit before R&D credit: £500,000. Corporation Tax rate: 25% (main rate).
Step 1: Identify qualifying expenditure
| Cost | Amount |
|---|---|
| 4 R&D engineers (salary + employer NI + employer pension) | £320,000 |
| Externally provided workers (UK PAYE) | £40,000 |
| Cloud compute (AWS) used in R&D | £60,000 |
| Software licences (R&D-specific) | £15,000 |
| Subcontracted UK university research | £25,000 |
| Consumables (test datasets bought in) | £5,000 |
| Total qualifying | £465,000 |
(Overseas contractor of £30,000 was excluded because the work didn't meet the geographical/regulatory necessity exception.)
Step 2: Calculate the merged-scheme credit
Above-the-line credit = 20% × qualifying spend
= 20% × £465,000 = £93,000
Step 3: Tax treatment of the credit
The credit is taxable.
- Adjusted profit after adding the credit: £500,000 + £93,000 = £593,000
- Corporation Tax @ 25%: £148,250
- Less: the credit applied against the CT bill (subject to the 7-step process): £93,000
- CT actually payable: £55,250
Without the R&D claim, CT would have been £500,000 × 25% = £125,000.
Step 4: Net benefit
| £ | |
|---|---|
| CT without R&D claim | 125,000 |
| CT after R&D claim | 55,250 |
| Net cash benefit | 69,750 |
That's a net rate of 15% of qualifying spend — typical for a profitable claimant on the 25% rate.
Step 5: Filing the claim
- Claim Notification Form — only needed if FraudShield hadn't claimed in the previous 3 years; assume it had, so not required this year.
- Additional Information Form — submitted before the CT600. Lists projects, technological advances, uncertainties, costs, and the senior technical lead.
- CT600 with the CT600L R&D supplementary pages.
- Submission deadline: 2 years after the end of the accounting period (31 March 2028 for this period).
Step 6: Records to keep
- Project plans showing the technological objectives
- Time-tracking by R&D engineers (typically 60–80% of paid time on this project)
- Invoices for cloud, software and subcontractors
- A short technical narrative (1–3 pages per project) covering the advance sought and the uncertainties resolved
What if FraudShield had been loss-making?
If the same £465,000 spend produced a loss, FraudShield could either:
- Carry the loss forward against future profits (worth roughly 25% later), or
- Surrender the loss for a payable credit under the merged-scheme cash credit route (subject to PAYE/NI cap)
If R&D spend exceeded 30% of total expenditure and FraudShield was an SME, it could instead use ERIS: 86% additional deduction + 14.5% payable credit on the surrendered loss — net benefit ≈ 27p per £1.
General guidance, not tax advice. Speak to a qualified accountant for advice tailored to your situation. Figures relate to the 2025/26 UK tax year. Source: HMRC, gov.uk.