*Guest article by LimestoneGrey. If you would like to submit an article or blog post please email [email protected].
The number of R&D tax relief claims has fallen, but HMRC’s latest statistics paint a much more positive picture of the R&D behind them.
HMRC estimates that 40,325 R&D tax relief claims were made for the 2024/25 financial year, 17% fewer than the previous year. Yet the amount of qualifying R&D expenditure underpinning claims increased by 7% to £51 billion, while the total value of relief claimed increased by 5% to £8.2 billion.
For R&D-intensive sectors such as life sciences, the distinction is important. Fewer claims do not necessarily mean less R&D is taking place.
R&D expenditure tells a different story
The average value of an R&D tax relief claim increased by 27% in 2024/25, a rise HMRC attributes to claims worth more than £2 million. HMRC itself notes that, given the significant changes to the R&D tax relief schemes and rates in recent years, qualifying R&D expenditure may provide a better comparison of recent trends.
Science and technology-led businesses also remain prominent users of the relief. Professional, Scientific & Technical activities accounted for 20% of claims and 24% of the total value of relief claimed in 2024/25. Together with Manufacturing and Information & Communication, the three sectors accounted for 75% of claims and 71% of relief claimed.
These broad industry classifications cannot be used as a measure of life sciences activity alone, but they demonstrate the continued concentration of R&D tax relief within research-led areas of the economy.
For life sciences businesses continuing to invest in research, product development and technological advancement, R&D tax relief therefore remains an important source of support.
A changing landscape for R&D-intensive life sciences businesses
The latest statistics are also the first to incorporate the new Merged R&D Expenditure Credit (Merged RDEC) and Enhanced R&D Intensive Support (ERIS), introduced for accounting periods beginning on or after 1 April 2024.
ERIS is particularly relevant to the life sciences ecosystem, where early-stage biotechnology, pharmaceutical, diagnostic and medical technology businesses can invest heavily in R&D for several years before becoming profitable.
Loss-making SMEs whose relevant R&D expenditure is at least 30% of their total relevant expenditure can access ERIS. The relief provides an additional deduction of 86% of qualifying R&D costs and a payable tax credit of up to 14.5% of the surrenderable loss.
HMRC does not report ERIS claims separately: it combines them with R&D-intensive SME claims made under the previous SME scheme, estimating 4,965 claims between the two in 2024/25.
For companies that do not qualify for ERIS, including SMEs that do not meet the 30% intensity condition, Merged RDEC will generally be the relevant form of R&D tax relief. This represents a significant change for SMEs that would previously have claimed under the former SME R&D scheme.
The change is starting to show in HMRC’s figures. HMRC counts each claim in the year its accounting period ends, so most 2024/25 claims were for periods that began before April 2024 and were made under the previous schemes. Even so, 6,840 claims came through Merged RDEC, an estimated 91% of them from SMEs.
For life sciences businesses, understanding which form of relief applies, and whether the business meets the intensity condition for ERIS, has therefore become an important consideration when planning and preparing an R&D tax relief claim.
Collaboration and contracted R&D require careful consideration
The new rules around contracted-out R&D are also particularly relevant to life sciences.
Collaboration is fundamental to the sector. A business might work with contract research organisations, specialist laboratories, universities, clinical partners or other third parties as it develops a new technology.
Under Merged RDEC, the rules determining which party can claim for contracted-out R&D have changed. Broadly, the customer claims if, when the contract was made, it intended or contemplated that R&D would be carried out; if not, the contractor may be able to claim in its own right. For a company commissioning a research study from a contract research organisation (CRO), that usually means the company claims, not the CRO.
The rules on overseas work have also tightened. For accounting periods beginning on or after 1 April 2024, contracted-out R&D generally qualifies only where the work is done in the UK. The exceptions are narrow. The main one applies where the R&D needs geographical, environmental, social or regulatory conditions that exist where the work is done but not in the UK, and replicating them here would be wholly unreasonable: a trial that needs a patient population not available in the UK, for example. Cost savings and workforce availability do not count.
For life sciences businesses with complex research partnerships and outsourced development activity, it is therefore increasingly important to consider the R&D tax implications of commercial arrangements rather than waiting until the claim is being prepared.
A continued focus on compliance
The fall in claim numbers should also be considered in the context of HMRC’s continued focus on compliance.
HMRC believes the continuing impact of the mandatory Additional Information Form, introduced alongside wider measures to improve compliance, is a key driver behind the reduction in claim volumes.
Businesses have always needed to be able to demonstrate that their activities meet the definition of R&D for tax purposes and substantiate the expenditure included within a claim. The Additional Information Form has now formalised how information about the R&D activities and costs is provided to HMRC as part of the claims process.
This reinforces the importance of being able to clearly articulate the existing baseline in the field, the scientific or technological advance being sought, the scientific or technological uncertainties involved and the work undertaken to resolve them.
This is particularly relevant in life sciences, where projects can be technically complex, span multiple accounting periods and involve numerous internal and external teams. Establishing robust processes to capture R&D activity and expenditure as projects progress can make a significant difference when the time comes to prepare a claim.
It also allows businesses to approach R&D tax relief proactively rather than trying to reconstruct the record of their R&D after the event.
R&D tax relief continues to support life sciences research
HMRC’s latest statistics demonstrate a changing R&D tax relief landscape, but they also show the qualifying R&D expenditure behind claims still rising, to £51 billion.
For life sciences businesses undertaking R&D, the focus is increasingly on understanding which form of relief applies, correctly identifying qualifying activity and expenditure, and ensuring the evidence is available to support a robust and compliant claim.
Source: HM Revenue and Customs, Research and Development Tax Credits Statistics: September 2026, published 29 September 2026. The 2024/25 figures are provisional, and changes are measured against HMRC’s revised 2023/24 figures. The Merged RDEC total and the year-on-year changes for scientific research and development (SIC 72) are LimestoneGrey’s calculations from HMRC’s tables. Full analysis: LimestoneGrey’s review of the 2026 statistics.
LimestoneGrey is a firm of Chartered Tax Advisers and Chartered Accountants specialising in R&D tax relief, based in Wales and working with companies across the UK; it was founded in 2017 by Matthew Jones ACA CTA and is a member firm of the Chartered Institute of Taxation (CIOT) and ICAEW. It works closely with scientific, technical and finance teams to understand the R&D taking place and supports companies throughout the claim process.