You spent £80k on product development last year. You might be owed money back from HMRC.

Most ambitious business owners are leaving money on the table. Not because they're careless, but because nobody told them their everyday problem-solving counts as research and development.

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If you spent £80k building, improving or figuring something out last year, there's a real chance HMRC owes you a slice of it back through R&D tax relief. And the definition of what qualifies is broader than almost anyone assumes.

R&D tax relief is a government incentive that rewards UK companies for investing in solving technical problems. You spend money advancing science or technology, and the government gives you relief on a chunk of that spend. If you're profitable, it cuts your corporation tax bill. If you're loss-making, you can often turn the relief into a cash payment. Either way, it's money back in the business.

What it's actually worth

Let's be precise about the numbers, because precision matters here. Since April 2024 the old SME and large-company schemes merged into one. Under the current merged R&D scheme, qualifying spend earns a credit worth 20% of that spend, and after corporation tax a profitable company typically nets between 15p and 16p for every pound.

So £80k of qualifying spend is worth around £12k back. For loss-making companies that are heavily R&D-focused, the figure can be considerably higher through Enhanced R&D Intensive Support. The exact amount depends on your profit position and how much of your spend qualifies, which is where most claims either win or fall apart.

What actually counts as R&D

This is where the opportunity hides. Most owners picture white coats and laboratories, but the reality is far wider. HMRC's test is simple: your project must seek an advance in science or technology, and it must involve overcoming uncertainty that a competent professional in your field couldn't easily resolve. It doesn't have to be new to the world. It has to be genuinely difficult to work out.

That covers a lot of ground:

• Building or improving software: a custom system, a tricky integration, a performance problem with no off-the-shelf answer
• Developing a new product or process: reformulating a recipe, engineering a component for conditions it wasn't built for, designing a manufacturing method that didn't exist before
• Adapting existing technology in a non-obvious way: making something faster, cleaner or more durable when the route there wasn't clear
• Failed projects: the one that surprises people most. If you attempted something technically uncertain and it didn't work, the spend may still count, because the test is the attempt, not the outcome

What doesn't qualify is routine work, cosmetic changes and anything a competent professional could resolve comfortably.

The costs you can claim are broader than expected too. They include salaries, employer National Insurance and pension contributions for the people doing the work, a proportion of certain support staff time, subcontractor and externally provided worker costs under the current UK-focused rules, and consumables like software, materials and a share of utilities. Add these up across a year of genuine development and the qualifying figure climbs fast.

Why this matters now

Two things make this worth acting on. The rates and rules changed in April 2024, so claims that worked under the old scheme need rethinking. And HMRC scrutiny has tightened, with mandatory notification deadlines, additional information requirements and far less tolerance for loose claims. Whilst the relief is still generous, the days of a casual claim are over. Getting it right means knowing precisely what qualifies, documenting it properly and filing it correctly.

So ask yourself: did we build, improve or solve anything technical last year? Did we hit problems where the answer wasn't obvious from the start? If you spent real money developing something and you've never made a claim, you're very likely owed something. The only question is how much, and whether you'll claim it before the window closes.

R&D claims reward precision and punish guesswork, and that's where we can help you. At Toast, we tell our clients exactly what qualifies, exactly what it's worth and exactly how to claim it without inviting trouble from HMRC.

If you spent on development last year, let's find out what you're owed.

This article is general guidance, not specific tax advice. R&D claims depend on your individual circumstances. Talk to us before you act.

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