R&D tax credits reduce tax for businesses that spend on qualifying research and development. As of October 2026, US businesses claim the federal research credit on Form 6765, and a qualified small business can use up to $500,000 a year of it against payroll tax. UK companies claim through the merged R&D expenditure credit at 20%, or enhanced R&D intensive support if they're loss-making and R&D intensive.
Both systems reward the same thing, work that tries to resolve technical uncertainty, but they're claimed in very different ways. The US credit is a percentage of research spend above a base amount. The UK relief is an expenditure credit or an extra deduction, with a payable credit for some loss-makers.
US vs UK at a glance
| US federal research credit | UK merged RDEC | UK ERIS | |
|---|---|---|---|
| Who claims | Any business with qualified research expenses | Trading companies chargeable to Corporation Tax | Loss-making R&D intensive SMEs |
| Headline rate | Regular credit: 20% of qualified research expenses over a base amount (15.8% if you elect the reduced credit) | 20% expenditure credit, taxable as trading income | Extra 86% deduction (186% in total), payable credit worth up to 14.5% of the surrenderable loss |
| Form | Form 6765 | Company Tax Return (CT600) and CT600L | CT600 and CT600L |
| Small business extra | Payroll tax offset up to $500,000 | None | Intensity condition: R&D at least 30% of total spend |
US: what counts as qualified research
The IRS calls it the four-part test, applied separately to each business component: the spending must be treated as domestic research or experimental expenditure under section 174A, the work must aim to discover information that's technological in nature, it must be intended to be useful in developing a new or improved business component, and substantially all of the activities must form a process of experimentation relating to function, performance, reliability or quality. Qualified research expenses are in-house research costs plus contract research costs.
The payroll tax election for start-ups
This is the part for young companies. A qualified small business, a corporation (including an S corp) or partnership with gross receipts under $5 million for the year and no gross receipts before the 5-year period ending with that year, can elect to use up to $500,000 of the credit against the employer share of social security tax. So a pre-profit start-up with no income tax to offset can still get value from it. The election is made on a timely filed original return, including extensions, and can't be made once you've made it for 5 or more earlier years.
Two more US details: Section G (business component information) is required on Form 6765 for tax years beginning after 2025, and partners and S corp shareholders whose only source of the credit is a pass-through usually report it straight on Form 3800 from their Schedule K-1.
UK: the merged scheme and ERIS
For accounting periods beginning on or after 1 April 2024, the merged R&D expenditure credit (RDEC) and enhanced R&D intensive support (ERIS) replaced the old RDEC and SME schemes. The qualifying cost rules are identical; only the calculation differs. You can claim merged RDEC even if you qualify for ERIS, but never both for the same cost. Only companies chargeable to UK Corporation Tax can claim, and a project must seek an advance in science or technology that a competent professional would recognise as an appreciable improvement.
- ERIS is only for SMEs that make a trading loss before the extra deduction and whose relevant R&D spend is at least 30% of total spend, including connected companies.
- The credit you receive in a period can't exceed the PAYE cap, unless you're exempt: £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities. Under merged RDEC any excess carries forward.
- Since 1 April 2023, mathematical advances can count as science.
How to claim in the UK, step by step
- Check whether you need a claim notification form: you do if it's your first claim, or your last claim was more than 3 years before the end of the notification period.
- Submit it within the claim notification period, which runs from the first day of the period of account to 6 months after its end. Miss it and the claim is invalid.
- Complete the additional information form for each accounting period, before or on the same day as the Company Tax Return. Send it first: if the return gets there before the form, the claim's rejected.
- Make the claim on the CT600, ticking boxes 656 and 657 and completing CT600L where it applies.
- Claim within 24 months of the end of a period of account of 18 months or less.
The verdict
If you build software, products or processes and hit technical problems you had to experiment your way through, check both systems before you assume they're for labs only. In the US, the payroll election is the lever for young companies. In the UK, the dates are the trap: the claim notification window closes 6 months after your year end, and HMRC treats a claim that misses it as invalid, however good the R&D.
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Frequently asked questions
What is the R&D tax credit rate in the UK?
Under the merged R&D expenditure credit scheme the rate is 20%. Loss-making R&D intensive SMEs can instead claim ERIS: an extra 86% deduction (186% in total) and a payable credit worth up to 14.5% of the surrenderable loss.
Can a US start-up with no profit use the R&D credit?
Yes, if it's a qualified small business with gross receipts under $5 million and no receipts before the 5-year period. It can elect to use up to $500,000 of the credit against the employer share of social security tax.
What form do you use to claim the US research credit?
Form 6765, Credit for Increasing Research Activities. Partners and S corporation shareholders whose only source is a pass-through usually report it directly on Form 3800.
Do I need to tell HMRC before claiming R&D relief?
Yes, if it's your first claim or your last claim was more than 3 years before the end of the claim notification period. The form must be in within 6 months of the end of the period of account.
What is the R&D intensity condition?
For ERIS, a company's relevant R&D expenditure must be at least 30% of its total expenditure, including that of connected companies.
