Could R&D tax relief claims help loss-making businesses?

2025 was a turbulent year for the global economy, seeing Trump’s tariffs dominate the first half of the year, only for businesses to have to endure a challenging Autumn Budget by the end.

The full impact of the Budget is still looming on the horizon, likely to be more keenly felt once the new tax year begins and more changes take effect.

As R&D remains a light in the darkness, we continue to encourage our clients to utilise the full scope of R&D tax relief claims available to them.

Do loss-making companies benefit more from R&D tax relief claims?

If your business does experience a downturn and you end up as a loss-making company, you may be wondering how that impacts your R&D tax relief claim.

Under the previous scheme, loss-making SMEs received a different rate of recovery when filing an R&D tax relief claim.

This was a more generous rate of recovery and was used by many businesses to remain an ongoing concern during difficult times.

The Merged Scheme no longer features special provisions for loss-making businesses.

Instead, they are subject to a notional tax deduction with the remaining amount being available as a cash payment, subject to the PAYE cap.

This makes the effective net benefit around 16.2 per cent.

Loss-making businesses are given special consideration if they are able to qualify as R&D intensive.

To qualify as an R&D intensive business, your R&D expenditure has to equate to at least 30 per cent of your total expenditure.

We can help you determine how much of your total expenditure is on R&D so that you know whether the uplifted rate, applied for through the ERIS scheme, can apply to your business.

If you are on the borderline, there is a grace period where, if you did qualify in the previous 12-month accounting period, you can still claim through the ERIS scheme.

Generally, though, it is challenging for businesses to meet the criteria if they are not dedicated to working on R&D, so there may be little recourse if your business does become loss-making.

Can I continue claiming R&D tax reliefs if my business experiences difficulties?

So long as your business remains operational, you can continue to claim R&D tax reliefs.

While the rate of recovery may not be as generous as it once was, R&D tax reliefs remain a particularly useful way to get some additional funds into innovative businesses.

The Government continues to commit to the importance of R&D and being a business that discovers a notable advance can be enough to turn fortunes around.

As even failed or aborted projects can qualify for R&D tax relief, you can be bolder in seeking innovation without it having to result in market success.

Where it does result in market success, you may find that your fortunes are improved by the work that was made possible with R&D tax relief claims.

This is why we continue to offer ongoing support to our clients so that they may feel the full impact of R&D tax relief claims.

Many of the operational costs that can prove challenging for businesses to manage can also be included in an R&D tax relief claim, which may help to ease your burdens.

We are keen to see your business make it through this next year and continue to be a force for innovation in the future.

Speak to our team today to get started on your next R&D tax relief claim.

Adam Bointon