R&D tax relief and Patent Box are the two UK incentives most likely to be worth real money to an innovative business and least likely to have a clear owner inside it. Both sit between finance, tax and the technical teams who actually do the work. Both have become considerably more demanding to claim. And both are usually handled by an external specialist, often on a fee linked to the benefit. This guide is about the in-house side: what the current rules require of the business, what capability that takes, who should own it, when an in-house hire is justified and when the adviser remains the right answer.
It is deliberately not a claims manual. For how a claim is prepared step by step — cost categories, apportionment and the year-end timetable — see our Financial Controller’s guide to R&D tax claims. This page covers the organisational question that sits above it.
The current R&D rules in brief
The rules changed substantially for accounting periods beginning on or after 1 April 2024, and the changes are the main reason in-house capability matters more than it used to. The summary below is a starting point; HMRC’s R&D relief guidance is the authority, and the detail should be checked against it for any specific claim.
The merged scheme
For periods beginning on or after 1 April 2024, the old SME scheme and the Research and Development Expenditure Credit (RDEC) were combined into a single merged scheme. It gives an above-the-line expenditure credit of 20% of qualifying R&D expenditure. The credit is taxable, so the net benefit for a company paying the 25% main rate is around 15p per £1 of qualifying spend. For loss-making companies, notional tax is applied at the small profits rate of 19% rather than 25%, so the net cash benefit can reach 16.2%.
The merged scheme also changed the treatment of contracted-out work and introduced restrictions on overseas subcontractor and externally provided worker costs, with limited exceptions. For businesses that use overseas development teams, this alone can change the value of a claim and needs someone inside the business who understands where the work is done and under what contracts.
ERIS for R&D-intensive loss-makers
Loss-making SMEs that are R&D intensive can instead claim under Enhanced R&D Intensive Support (ERIS). A company qualifies where its relevant R&D expenditure is at least 30% of its total relevant expenditure (the threshold was 40% before 1 April 2024). ERIS gives an additional 86% deduction and a payable credit of 14.5% of the surrenderable loss, worth roughly 27p per £1 of qualifying spend. Measuring intensity accurately is itself a finance task: it depends on how total expenditure is defined and how group relationships are treated, so a business near the threshold needs reliable numbers before it chooses a route.
Claim notification
For accounting periods beginning on or after 1 April 2023, a company claiming for the first time, or that has not claimed in any of the previous three accounting periods, must notify HMRC of its intention to claim within six months of the end of the period of account. Miss it and no claim can be made for that period. This is the requirement most likely to catch a business without an internal owner, because it falls due long before anyone is thinking about the tax return.
The additional information form
Since 8 August 2023, every R&D claim must be supported by an additional information form submitted before the Company Tax Return; if it is not, the claim is removed from the return. The form asks for qualifying expenditure by category, the senior R&D contact and any agent, and project-level descriptions: the field of science or technology, the baseline of knowledge, the advance sought, the uncertainties faced and how the company tried to resolve them. Up to three projects must all be described; larger claims must describe a defined subset. In practice, the form is impossible to complete well without records made during the year — which is the core argument for in-house capability.
Patent Box in brief
Patent Box is a different relief and different work. A company that elects in can apply an effective 10% rate of corporation tax to the profits attributable to qualifying patents, against the 25% main rate. The reduced rate is delivered as an additional deduction in the corporation tax computation rather than a separate rate, as HMRC’s Corporate Intangibles Research and Development Manual explains.
- Qualifying IP: patents granted by the UK Intellectual Property Office, the European Patent Office or certain other EEA patent offices, plus some equivalent rights such as supplementary protection certificates.
- Development and ownership: the company (or a group company) must have made a significant contribution to developing the invention, and a group company must meet an active ownership condition.
- Election: made within two years of the end of the accounting period concerned, and it then applies to later periods until revoked.
- The calculation: relevant IP profits are found by identifying IP income, removing a routine return and a return on marketing assets, and then applying the R&D (nexus) fraction, which ties the benefit to the company’s own R&D spend relative to acquired IP and connected-party subcontracting. Since July 2021 all claimants use this streaming approach.
The nexus fraction is why Patent Box is so demanding of systems. The company has to track and trace R&D expenditure to individual patents or product families over many years, not just the current period. That is long-horizon record-keeping, and it is the main reason fewer eligible businesses claim than could.
Why in-house capability has become more valuable
Compliance requirements have tightened. Claim notification, the additional information form and the overseas restrictions all assume someone in the business is organised about it. A claim assembled retrospectively from memory is now materially weaker than one supported by contemporaneous records.
HMRC compliance activity has increased. HMRC has been open about stepping up its checks on R&D claims after concerns over error and fraud in the SME scheme. Defending a claim requires the underlying evidence rather than a persuasive narrative, and businesses whose entire rationale lives in an adviser’s file find that uncomfortable.
And fees linked to the benefit become expensive at scale. As an illustration only: a fee of 20% of the benefit is a modest sum on a small claim, but on a benefit of £600,000 it is £120,000 a year. At that point the arithmetic of bringing capability in-house changes entirely.
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What the work actually requires
Four capabilities, and only one of them is tax technical.
Identifying qualifying activity. The hardest part, and it is a translation problem rather than a tax one. Someone has to sit with engineers or developers, understand what they were trying to achieve, and decide whether it involved genuine scientific or technological uncertainty rather than routine application of existing knowledge. Finance people often under-claim because they do not recognise qualifying work; technical people over-claim because everything feels novel.
Cost capture and apportionment. Staff time, subcontractors, externally provided workers, consumables, software, cloud computing and data costs. This is management accounting work, and it is far easier if time recording and project coding were designed with the claim in mind rather than reconstructed afterwards. The location of contractors now matters too.
Technical narrative. Writing up the baseline, the uncertainty and the advance in language that meets the requirements without overstating. The additional information form now forces this into a fixed structure, and it is where poorly prepared claims are most exposed on enquiry.
Patent Box tracking. Tracking qualifying IP income by patent or product family, running the streaming calculation and the nexus fraction, and maintaining the records over years. It is more mechanical than R&D and more demanding of systems, which suits a tax manager with strong spreadsheet and data skills.
Who should own it
The realistic options, in ascending order of scale.
The Financial Controller, with an adviser. The most common arrangement and right for most businesses. The FC will typically be qualified through ICAEW, ACCA or CIMA, with the adviser bringing CTA-level specialism from the Chartered Institute of Taxation. The FC owns cost capture, the notification deadline and the relationship with the technical team; the adviser owns the technical narrative and the submission.
An in-house tax manager, with an adviser on the narrative. Sensible once a tax function exists. The internal person knows the business and captures evidence through the year; the adviser provides specialist judgement on marginal activity and a second pair of eyes on the form.
A dedicated innovation-incentives role. Rare, and justified only where claims are large and recurring — typically a business claiming several hundred thousand pounds a year with an active patent portfolio, or a group with several R&D-active subsidiaries.
Or a hybrid that works well: the management accountant owns cost capture and project coding as part of the monthly cycle, the FC owns the process and the deadlines, and the adviser is engaged for the technical narrative on a fixed fee. That arrangement captures most of the saving without a hire. Where the finance function itself is still being built, our guide to building a finance team around a Financial Controller shows where this sits.
When an in-house hire beats adviser fees
The house rule of thumb we use with clients: once a business is spending around £100k–£110k a year on external tax advice — R&D and Patent Box fees plus routine compliance and ad hoc advice — an in-house tax hire usually pays for itself. The reason is simple arithmetic. A Tax Manager in London typically costs £60k–£80k in salary; add employer National Insurance at 15% on earnings above £5,000 (from April 2025), pension and benefits, and the fully loaded cost lands in a similar range to that fee level. The in-house person then also does the work the adviser was never paid for: capturing evidence through the year, spotting missed qualifying activity, and challenging what remains outsourced.
Three tests should all be true before you hire.
- The claim is recurring and material — annual, and large enough that the fee is a meaningful number.
- The identification work is ongoing rather than annual. Businesses with continuous development benefit from someone capturing evidence as it happens; businesses with occasional projects do not.
- There is adjacent work to fill the rest of the role. Nobody is hired solely for R&D claims below a very large scale. The realistic version is a tax manager or senior management accountant whose remit includes innovation incentives alongside corporation tax, VAT or provisioning.
For the wider decision of when to bring tax in-house, see hiring your first in-house tax manager and how to build a scalable tax team. If you need cover while you decide, our interim tax recruitment service places specialists for a claim cycle or a Patent Box set-up.
When the adviser remains right
Where claims are occasional or the business is claiming for the first time — the learning curve is steep, the notification deadline is unforgiving and the first claim sets the pattern.
Where the qualifying judgement is genuinely marginal. A view from a specialist firm carries weight on enquiry that an internal assessment may not.
Where a Patent Box election is being considered, since the initial analysis is specialist and the decision is long-term.
And on any enquiry. Defending a challenged claim is disputes work rather than claims work — see our guide to the tax investigations role.
What is worth changing even where the adviser stays: move to a fixed fee once the claim is established and recurring. Fees linked to the benefit make sense when the adviser is doing the identification work and carrying the risk; they make less sense in year four when the business has done most of the preparation itself. Our guide to managing external tax advisers covers scoping and fee structures.
The roles and what they pay
The people who end up owning R&D and Patent Box are usually in one of the roles below. Figures are our house London ranges for permanent and interim roles; regional salaries are typically lower.
| Role | Typical R&D / Patent Box remit | Typical pay |
|---|---|---|
| Management Accountant | Project coding, time capture, cost apportionment | £50k–£85k (mid £58k–£73k) |
| Tax Manager | Owns the claim process, notification, form and adviser relationship | £60k–£80k |
| Senior Tax Manager | R&D and Patent Box across a group, enquiry handling | £75k–£100k |
| Head of Tax | Strategy, elections, risk appetite, board reporting | £95k–£140k |
| Interim tax specialist | A claim cycle, a Patent Box set-up, or cover | £450–£700 a day |
A CTA typically adds around £8k–£18k to a tax salary, and international or transfer pricing specialists — relevant where R&D and IP sit in different jurisdictions — typically earn £85k–£120k. More detail is in our in-house tax manager salary guide and interim tax day rates. Where the innovation strategy is a board-level question, sister firm FD Capital handles CFO and Finance Director appointments.
What to do in-house regardless
Five things that improve every claim and cost little to start.
- Diary the notification deadline for every period in which a claim is possible, even if you are not sure you will claim. Missing it cannot be fixed later.
- Code project time properly at source, so cost apportionment is a report rather than a reconstruction.
- Capture the technical rationale as you go — a short note when a project starts, setting out the baseline and what was uncertain, maps directly onto the additional information form and is worth far more at enquiry than a narrative written eighteen months later.
- Keep subcontractor, externally provided worker and consumables records aligned to projects, including where the work was physically done.
- Review eligibility across the whole business annually, not just the obvious department; qualifying activity in operations, manufacturing process or software integration is regularly missed.
Doing those well is the difference between a defensible claim and a hopeful one — and it is management accounting work rather than tax work, which is why it belongs in the monthly cycle rather than in a scramble before the return is filed. For manufacturing businesses in particular, our guide to management accounting and manufacturing costing shows how project costing can be built into existing processes.
Frequently asked questions
What is the merged R&D scheme rate?
A taxable expenditure credit of 20% of qualifying R&D expenditure, for accounting periods beginning on or after 1 April 2024. Net of tax, that is around 15% for a company paying the 25% main rate, and up to 16.2% for loss-makers, whose notional tax is set at 19%.
Who qualifies for ERIS?
Loss-making SMEs whose relevant R&D expenditure is at least 30% of total relevant expenditure. ERIS gives an 86% additional deduction and a 14.5% payable credit on the surrenderable loss.
Do we need to notify HMRC before claiming?
If you are claiming for the first time, or have not claimed in any of the previous three accounting periods, yes — within six months of the end of the period of account. Every claim also needs the additional information form submitted before the tax return.
How does Patent Box reduce tax?
It gives an effective 10% corporation tax rate on profits attributable to qualifying patents, delivered as an additional deduction. The election must be made within two years of the end of the accounting period, and the nexus fraction links the benefit to the company’s own R&D.
When should we hire in-house rather than rely on advisers?
As a rule of thumb, once total external tax spend reaches around £100k–£110k a year and there is enough recurring work to fill a role. Below that, a Financial Controller or management accountant owning the process with a fixed-fee adviser is usually better value.
Should the R&D owner sit in tax or finance?
The process usually sits best with whoever owns the monthly numbers — often the Financial Controller — with technical tax input from a tax manager or adviser. Cost capture is a finance task; the qualifying judgement and the narrative are tax and technical tasks.
Adrian Lawrence FCA — Founder, Accountancy Capital
Fellow of the ICAEW | Chartered Accountant holding an ICAEW practising certificate | Part of FD Capital Group
Adrian is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and later Accountancy Capital, whose recruitment team places in-house tax managers, management accountants and interim tax specialists. The businesses that get most from R&D relief are usually the ones that capture the evidence as they go, rather than the ones with the cleverest advisers.
Related Pages and Resources
Careers in Tax
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Adrian Lawrence FCA is the founder of Accountancy Capital and a Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW). He holds a BSc from Queen Mary College, University of London, and has over 25 years of experience as a Chartered Accountant and finance leader working with private, PE-backed and owner-managed businesses across the UK
He helps his clients achieve their growth and success goals by delivering value and results in areas such as Financial Modelling, Finance Raising, M&A, Due Diligence, cash flow management, and reporting. He is passionate about supporting SMEs and entrepreneurs with reliable and professional Chief Financial Officer or Finance Director services.