As 2025 draws to a close, it is clear that this has been one of the most consequential years for UK R&D tax relief since the original SME and RDEC regimes were introduced. The scale of legislative change, HMRC intervention, and practical consequences for genuine innovators has been significant. Across our writing this year, a number of consistent themes have emerged, each pointing to a regime that is still evolving and, in places, still unsettled. The schemes have also received significant coverage in the mainstream press, which we have examined throughout the year.
The most obvious shift has been structural. The move to a merged R&D scheme from April 2024 has continued to ripple through 2025, with the first periods under the new law now complete and many companies only beginning to experience the full impact. We explored the mechanics of the new system and what changed in practice in Navigating the UK’s New Merged R&D Scheme and followed this with more detailed guidance on how the revised RDEC style calculation now operates in Understanding the New RDEC Calculation Under the Merged R&D Scheme.
For some businesses, particularly those historically relying on the SME scheme, the results have been counterintuitive. In The Hidden Tipping Point we examined situations where R&D intensive SMEs may now be better off under RDEC than under the intensive ERIS option they assumed would always be superior.
R&D intensity itself has become a defining issue in 2025. The introduction of enhanced support and ERIS has created genuine opportunities for loss making companies, but only where the rules are applied precisely. We addressed this both from a practical and technical perspective in ERIS and Enhanced R&D Intensity and in a deeper legislative analysis aimed at advisers in Understanding ERIS Calculation and Eligibility.
Alongside these changes, HMRC’s evolving approach has been a constant backdrop. The creation of the R&D Expert Advisory Panel was positioned as a way to inject industry insight into policy, although questions remain about its real influence, as explored in our commentary on the panel.
Similarly, HMRC’s new R&D tool was a welcome acknowledgement that clearer signposting is needed, but it remains only a starting point rather than a solution.
Several blogs this year addressed the tension between HMRC guidance and the underlying law. Overseas R&D, subsidised expenditure, contracted out R&D, and payment conditions have all been areas where interpretation has shifted. We explored when overseas activity can still qualify and examined whether recent CIRD changes genuinely reflect tribunal outcomes.
The importance of evidence and correct payment treatment was also examined and remains a key theme.
One of the most sobering themes of 2025 has been the human cost of compliance failures. Increased scrutiny has undoubtedly targeted abuse, but it has also placed strain on legitimate claimants and sits alongside wider questions about whether HMRC has overcorrected in its response to past issues.
Throughout the year we also returned repeatedly to first principles. What actually qualifies as R&D has not changed as much as some believe, but misunderstanding remains widespread. The boundaries of R&D, real world technological uncertainty, and the risks of stretching definitions beyond what the legislation supports.
Taken together, 2025 tells a clear story. R&D tax relief remains an essential incentive for innovation, but it now demands higher standards, deeper legislative understanding, and stronger professional judgement. Good advisers should be prepared to challenge weak claims and, where necessary, advise clients not to proceed. That discipline is what ultimately protects the integrity of the regime and the businesses it is meant to support.
If you would like to discuss how these changes affect your business, or whether an R&D claim remains appropriate under the current rules, please get in touch.
All that remains is to wish my readers a Merry Christmas and a Compliant New Year 🙂
Christopher Toms MA MAAT
Compliance Director
RandDTax