Understanding R&D tax relief: What matters most for US companies operating in the UK

The UK R&D tax regime continues to provide meaningful support for companies advancing technology, solving complex technical problems and pushing beyond existing capabilities. In practice, many international groups are leaving value unclaimed, not because they are ineligible, but because the compliance environment appears more daunting than it actually is when approached properly.

A regime that tightened, not closed

There is no question that the UK has strengthened its approach to R&D claims in recent years. Following a sharp rise in claims and concerns around error and abuse, HM Treasury and HM Revenue & Customs (HMRC) introduced additional procedural safeguards.

Two changes in particular have shaped perceptions. First, new or returning claimants must submit an Advance Notification Form within six months of the company’s year-end, signalling their intention to make a claim. Second, all claimants must now complete an Additional Information Form before filing their Corporation Tax Return, setting out structured technical and financial details of the R&D undertaken.

These measures were designed to improve claim quality, not to narrow the definition of qualifying R&D. The underlying eligibility rules remain largely unchanged. Companies that were undertaking genuine, structured R&D before these reforms are continuing to claim successfully today. What has changed is the emphasis on clarity, structure and substance.

What qualifies in practice

A common misconception is that UK R&D relief applies only to laboratory-based science or highly academic research. In reality, the regime applies widely across areas where many international businesses are investing heavily in the UK.

Software development, systems architecture, data engineering, AI-driven platforms, cloud migration and complex digital product development frequently involve qualifying R&D. The key question is not whether the work looks innovative on the surface, but whether it involved attempting to resolve genuine technological uncertainty that could not be solved by applying existing knowledge or readily available solutions.

Why strong claims succeed

Under the current compliance framework, successful claims hinge on how clearly the technical story is articulated. HMRC is not looking for marketing language or a description of the final product. It is looking for evidence of a structured process that moved from uncertainty to resolution.

Strong claims typically address five core areas:

• What the project set out to achieve
• The existing baseline of knowledge or capability
• The scientific or technological advance sought
• The uncertainties encountered and how they were addressed
• How competent professionals within the business led and executed the work

This mirrors the structure of the Additional Information Form and reflects HMRC’s focus on substance over scale. Most projects contain a mix of routine development and qualifying R&D. A robust claim clearly distinguishes between the two and presents the qualifying work as a coherent programme of uncertain advancement rather than a broad development exercise.

Claims are particularly compelling when technical teams themselves, such as engineers, data scientists, developers or architects, are closely involved in explaining where established approaches fell short and how iterative testing and problem-solving were required.

The importance of early planning

For companies expanding into the UK, timing matters. The introduction of the Advance Notification Form means that R&D should be considered early in the lifecycle of a UK operation. Leaving the question until after year end risks missing notification deadlines or compressing the technical analysis needed to support a strong claim.

Even when deadlines are met, decisions around preparation still matter. When claim preparation is delayed, key technical details fade from memory and organisations can overlook elements that would otherwise strengthen a submission. This loss of clarity can weaken the supporting narrative and increase the likelihood of an HMRC enquiry, issues that are largely avoidable when claims are prepared while project knowledge is still fresh.

By contrast, organisations that plan ahead, capture technical decision-making as projects evolve and engage with the process proactively are finding that outcomes remain consistently positive. Recent experience shows that HMRC continues to engage constructively with well-founded claims supported by clear evidence and coherent narratives.

Looking beyond perception

The UK R&D regime has evolved, but its core objective has not changed. It exists to encourage companies to invest in technological advancement. For US businesses building engineering, product and data capability in the UK, it remains a valuable and often underutilised incentive.

Those that look beyond the headlines, assess their activities against the UK’s definition of R&D and approach the process with the right level of rigour frequently discover that they are undertaking far more qualifying activity than they initially assumed.

With early consideration, the right technical input and a narrative that reflects the true complexity of the work, UK R&D tax relief remains both accessible and commercially meaningful.

How ZEDRA can help

ZEDRA has decades of experience supporting businesses with UK R&D tax relief, helping translate complex technical activity into the clear, compliant narratives HMRC expects. Our team works closely with clients’ technical and finance teams to ensure claims are robust in substance, aligned with current process requirements and supported by evidence.

If you would like to discuss how R&D tax relief may apply to your UK operations, contact Mark Pashley to explore your circumstances in more detail.