R&D tax relief and SEIS / EIS often appear together in early-stage UK companies. Both reward genuine innovation, both involve detailed HMRC submissions, and both have moved through significant reform in 2023, 2024, and 2025. The interaction between the two regimes determines how much cash a startup retains and how investors see their return profile.
The merged R&D scheme in 2026
From accounting periods beginning on or after 1 April 2024, R&D tax relief was reformed into a single merged scheme similar in design to the old RDEC. The headline credit is 20% of qualifying R&D expenditure, paid above the line and subject to corporation tax. The net cash benefit is approximately 15p per GBP 1 of R&D spend for profitable companies and 16.2p for loss-makers after the new payable credit rate.
Alongside the merged scheme, R&D-intensive SMEs (those with qualifying R&D representing at least 30% of total expenditure, reduced from 40%) continue to access enhanced relief: a 86% additional deduction and a payable credit of 14.5%, yielding around 27p per GBP 1 of R&D spend.
The advance notification trap
For accounting periods beginning on or after 1 April 2023, claimant companies that have not made an R&D claim in the previous three years must submit an advance notification to HMRC within six months of the end of the accounting period for which they intend to claim. Miss this and the claim is invalid. This rule has caught hundreds of first-time claimants. We monitor notification deadlines for every new client.
The Additional Information Form
From August 2023, all R&D claims require an Additional Information Form (AIF) describing the project, the scientific or technological uncertainty, the systematic approach taken, and a project-level breakdown of qualifying costs. HMRC routinely rejects vague or templated submissions. We write project narratives jointly with the technical lead.
Interaction with SEIS / EIS
SEIS and EIS funding is not "income" for R&D purposes, but the way it is recorded affects calculations.
- Notional grants and subsidies: any notified state aid or subsidy received towards R&D expenditure used to push claims into RDEC under the old regime. Under the merged scheme this distinction is less critical, but specific grants (Innovate UK, Horizon Europe) still carry notification implications.
- Cash flow timing: SEIS / EIS funding extends runway, which extends the R&D claim period. We model claim cash receipts (typically 12 to 16 months after the period end) into 18-month funding forecasts.
- Intensity calculations: total expenditure includes wages, rent, software, and overheads. Founders often miscount expenditure when calculating whether they meet the 30% R&D-intensive threshold. The denominator is broader than people expect.
Qualifying costs in 2026
Eligible costs include:
- Staff costs for R&D personnel (salary, employer NIC, pension).
- Externally provided workers (EPWs) and subcontractor costs (subject to 65% restriction unless the subcontractor is connected and joint election applies).
- Consumable items used or transformed in R&D.
- Software licences for R&D use.
- Cloud computing and data licence costs (added from April 2023).
- A reasonable apportionment of utilities where R&D takes place on the company's premises.
Costs incurred outside the UK are no longer claimable except in narrow circumstances (data not available in the UK, regulatory necessity, or qualifying overseas activities).
A worked example
An AI startup raises GBP 250,000 SEIS in May 2025, then GBP 1.2m EIS in February 2026. Its accounting period runs to 31 March 2026.
- Total expenditure: GBP 850,000 (mostly engineer salaries).
- Qualifying R&D expenditure: GBP 620,000 (73% of total).
- R&D-intensive threshold of 30% comfortably met.
- SME enhanced credit: approximately GBP 167,000 cash refund expected.
- Advance notification was filed in September 2025.
- EIS funds used for engineer hires from March 2026 onwards, fuelling the 2026-27 R&D claim.
How we manage the combined work
Our tax planning team sequences advance notifications, R&D claim periods, SEIS / EIS compliance statements, and EMI valuations across the founder's first three to five years. Business advisory sets cash forecasts that account for claim receipts. Book a session or visit our startup page.