HMRC clarified that companies meet the R&D intensity condition if their relevant R&D expenditure equals at least 40% of total expenditure, including that of the wider group where applicable.
UK’s HM Revenue & Customs (HMRC) has updated its guidance on Research and Development (R&D) tax relief for small and medium-sized enterprises (SMEs).
Updates on 13 October 2025 clarified how companies can meet the R&D intensity condition.
HMRC confirmed on 15 October 2025 that a company satisfies this condition if its relevant R&D expenditure is at least 40% of total expenditure, including the wider group where applicable.
The guidance also explains that the “year of grace” only applies to periods starting on or after 1 April 2024. This allows companies that fall below the intensity threshold in the current period to still claim the enhanced credit if they met the threshold in the previous accounting period.
HMRC’s additional information form portal now enforces these rules for earlier periods, preventing claims that do not meet the 40% R&D intensity requirement.
