Will the R&D Scheme Survive Another Reform Cycle?

After years of piecemeal reform, the merged R&D tax relief scheme was heralded as a fresh start. But even as businesses adjust to this new regime, many are asking: will it last?

The Short Answer: It Depends.

What’s Driving Further Reform?

  • Fraud and Abuse: HMRC has lost hundreds of millions to inflated or fraudulent claims, fuelling political and public pressure to tighten the scheme.

  • Budgetary Pressures: With public finances under strain, generous tax reliefs are often among the first to face scrutiny.

  • Lack of Economic Attribution: Critics argue that too few claims translate into UK-based commercialisation or meaningful productivity gains.

Where Might We Go Next?

  • A future government could overhaul the scheme again, possibly introducing more targeted reliefs focused on "critical technologies" such as AI, net zero, and advanced manufacturing.

  • The scope for claims by overseas groups or loss-making start-ups may narrow further.

  • We may see more real-time data sharing, tighter compliance checks, and mandatory pre-approval processes.

One of the more significant proposals currently under review is the reform of the Advance Assurance mechanism. Although intended to offer peace of mind to first-time claimants, it remains severely underutilised, with only around 80 applications made last year out of an estimated 11,500 eligible. This is due in part to its restrictive eligibility criteria (only first-time claimants with fewer than 50 employees and turnover under £2 million qualify), but also a lack of clarity and awareness.

The government is now exploring ways to broaden and strengthen this concept into a more scalable Advanced Clearance route, potentially mandatory, that could become central to the R&D compliance process.

How Businesses Can Future-Proof Their Claims

Looking ahead, businesses can take key steps to better position themselves amid ongoing structural change:

  • Prioritise Technical Merit: HMRC is likely to continue rewarding technically robust and well-substantiated claims.

  • Document in Real Time: Detailed, contemporaneous records strengthen audit resilience and may be essential under any new pre-clearance framework.

  • Invest in UK-Based R&D: Projects with a strong domestic footprint and visible economic contribution are more defensible and more likely to remain eligible.

While the scheme’s future remains politically sensitive, one thing is clear: businesses that treat R&D tax relief as part of a long-term innovation strategy, rather than a one-off financial windfall, will be far better positioned to weather further reforms.