What are R&D tax credits?
R&D tax credits are a UK government incentive that allows companies to claim back a portion of their spending on qualifying research and development activities. Depending on your company’s circumstances, the benefit comes either as a reduction to your corporation tax bill or as a direct cash payment from HMRC. For loss-making businesses, including most early-stage startups and growth-stage tech companies, HMRC pays the credit as cash directly into your account.
The scheme exists to encourage UK businesses to invest in innovation. In practical terms, it is one of the most valuable incentives available to SMEs, often worth between £20,000 and £250,000+ per year. Sectors that commonly benefit include software development, biotech, engineering, manufacturing and pharmaceutical research, though the scheme is open to any industry where qualifying R&D takes place. Fundably partners with Accountancy Cloud to prepare and submit your R&D tax credit claim, and with Buzz Capital to advance up to 80–85% of the expected HMRC payout before the claim is processed, giving you access to that cash within weeks rather than months.
Who qualifies for R&D tax credits in the UK?
You do not need to be a scientific research company. HMRC’s definition of qualifying R&D expenditure is deliberately broad. Your project may qualify if your team attempted to resolve a scientific or technological uncertainty where the solution was not readily available to a competent professional in the field.
Common examples of qualifying R&D include:
- Developing new software features or systems where the technical approach was not obvious at the outset.
- Building bespoke internal tools that required solving novel technical challenges.
- Engineering new or improved manufacturing processes.
- Developing new pharmaceutical compounds, formulations or medical devices.
- Creating new materials, algorithms or data architectures.
- Any project where prototyping, testing and iteration were required to overcome a technical uncertainty.
Qualifying costs that can be included in your claim:
- Staff salaries and employer NICs for employees directly involved in R&D work.
- Subcontractor costs (at a reduced rate for externally provided workers).
- Cloud computing and data costs directly attributable to R&D activities.
- Software licences used in the R&D process.
- Consumable materials used up or transformed during R&D.
Many businesses underestimate the scope of their qualifying expenditure. If your team spent time trying to solve a technical problem where the outcome was genuinely uncertain, that work is likely eligible.
How much are R&D tax credits worth?
The UK R&D tax credit scheme was restructured in April 2023. The current framework operates through two main paths:
Merged RDEC scheme (from April 2024). Most companies now claim under the merged Research and Development Expenditure Credit scheme. This provides an above-the-line credit of 20% on qualifying R&D expenditure. After corporation tax, the effective benefit rate for profitable companies is approximately 15%. Loss-making companies can receive a cash credit, though the net rate depends on the payable credit calculation.
Enhanced R&D intensive support. Loss-making SMEs where R&D expenditure represents 30% or more of total expenditure qualify as “R&D intensive” and can claim a higher payable credit rate of 14.5% on the surrenderable loss. This is a significant benefit for early-stage tech and biotech companies that are spending heavily on development before generating revenue.
To illustrate the value with practical examples:
- A profitable company spending £200,000 on qualifying R&D could receive an effective benefit of approximately £30,000 to £40,000.
- A loss-making R&D-intensive startup spending £500,000 on qualifying R&D could receive a cash payment from HMRC in excess of £90,000.
For startup businesses that are pre-revenue or in early growth, the R&D tax credit cash refund is often one of the most significant sources of non-dilutive funding available.
How long does HMRC take to pay R&D tax credits?
HMRC typically takes 3 to 9 months to process an R&D tax credit claim and release the payment. Processing times can be longer if HMRC opens a compliance enquiry into the claim, which has become more common as HMRC increases scrutiny of R&D claims.
For a business that has spent heavily on engineers, researchers and development costs over the past financial year, this cash is often critical. But the delay between submitting the claim and receiving the money creates a significant cash flow gap. Salaries, rent and supplier invoices do not wait for HMRC.
What is an R&D tax credit advance?
An R&D tax credit advance (also called R&D credit-backed finance) is a short-term loan secured against your pending R&D tax credit claim. A specialist lender advances up to 80 to 85% of the expected HMRC payout before HMRC processes the claim, typically within 2 to 4 weeks of application.
When HMRC pays out, you use the proceeds to repay the advance. The net cost is usually 1 to 3% of the claim value, which is considerably cheaper than most other bridge financing options, equity dilution or working capital facilities.
This makes R&D credit advances particularly attractive for businesses that:
- Need to fund ongoing development while waiting for HMRC.
- Want to hire additional technical staff and cannot wait months for the credit to land.
- Are approaching a cash flow pinch point and need a predictable, low-cost solution.
- Have a confirmed claim but face uncertainty about HMRC’s payment timeline.
How to get an R&D tax credit advance through Fundably
Fundably runs R&D credit advances as an end-to-end partnership so you do not have to coordinate the claim and the funding separately:
- Accountancy Cloud prepares the claim. Fundably partners with Accountancy Cloud, a specialist R&D and finance team, to identify qualifying expenditure, build the technical narrative and submit the claim to HMRC. They handle the full process if you do not already work with an R&D tax adviser.
- Buzz Capital advances the cash. Once the claim is in shape, Buzz Capital (our flagship R&D advance lender) advances up to 80–85% of the expected HMRC payout, typically within 2 to 4 weeks. When HMRC pays out, the proceeds repay the advance.
- One application. You submit a single short application to Fundably and we coordinate the introductions across both partners and our wider panel of 50+ UK lenders if a different structure suits you better.
What you need to apply:
- A prepared R&D tax credit claim (or willingness for Accountancy Cloud to prepare one for you).
- Basic company financials, typically available via your accounting software.
The initial matching uses a soft credit check, which does not affect your credit score and is not visible to other lenders. As a commercial finance broker and NACFB member, Fundably manages the process from claim to cash. The application takes approximately 5 minutes and you can expect initial offers within 48 hours.
Practical tips for maximising your R&D claim
Engage a specialist R&D tax adviser. If you do not already use one, consider doing so. R&D tax advisors typically work on a success fee (10 to 15% of the claim value) and can identify qualifying expenditure your team may have overlooked. A good adviser will also help you structure the technical narrative to withstand HMRC scrutiny.
Track qualifying costs from day one. Use your accounting software (Xero, QuickBooks, Sage) to tag R&D-related costs as they are incurred. This makes claim preparation faster and more accurate. Some R&D credit platforms integrate directly with cloud accounting tools.
Do not double-claim. If your business also qualifies for other creative industry reliefs such as Video Games Tax Relief, you cannot claim R&D tax credits on the same expenditure. However, costs outside the scope of the other relief may still qualify for R&D credits.
Prepare for compliance checks. HMRC has increased the rate of enquiries into R&D claims. Ensure your claim is well-documented, with a clear technical narrative explaining the uncertainties your team sought to resolve.
Ready to access your R&D credit early?
If your business has a pending R&D tax credit claim and needs cash before HMRC pays out, Fundably can match you with specialist lenders in minutes.
Check your eligibility now and get matched with R&D credit advance lenders today.