The UK’s £55bn R&D Investment: How Businesses Can Prepare to Capitalise

December 2, 2025

By Malcolm Henderson, Associate Director

In late October, the UK Government announced a £55 billion commitment to research and development, led by the Department for Science, Innovation and Technology (DSIT). This funding, to be deployed through UKRI and related bodies over the coming years, is designed to accelerate innovation across health, clean energy, artificial intelligence, quantum technologies, and advanced manufacturing. 

 

Crucially, this investment represents a direct government spending commitment, not a tax measure. Its objective is to stimulate innovation-led growth by funding R&D activity, strengthening national capabilities, and supporting the commercialisation of breakthrough technologies. 

At the same time, the primary fiscal mechanism supporting business-led innovation – R&D Tax Relief, administered separately by HMRC – is undergoing heightened scrutiny and regulatory tightening. While DSIT’s focus is on encouraging innovation at scale, HMRC’s mandate is to ensure compliance, prevent abuse, and protect public funds. 

Successfully navigating this landscape will depend on how well businesses structure their R&D activity, build robust evidence, and engage with the right expertise to access government support with confidence.

 

The Evolution of R&D Tax Relief in the UK 

The UK’s R&D tax relief regime was introduced in 2000 to encourage businesses to invest in innovation by reducing the financial risk of developing new or improved products, processes, and technologies. Its purpose was clear: to reward companies that push technological boundaries and strengthen the UK’s long-term competitiveness. 

Over time, however, the regime has evolved. What was once a relatively accessible incentive has become a highly scrutinised area of tax compliance, shaped by rising claim volumes, misuse by bad actors, and HMRC’s need to ensure public funds deliver demonstrable economic value. 

This tightening of oversight is not accidental. With government R&D investment increasing at scale, HMRC’s focus has shifted decisively towards quality, transparency, and evidence. 

 

The Merged Scheme and the Expanded Role of RDEC 

One of the most significant changes to UK R&D tax relief in recent years has been the move towards a merged R&D scheme, built largely around the Research and Development Expenditure Credit (RDEC) framework. 

Historically, companies claimed under one of two regimes: 

  • The SME scheme, offering enhanced deductions and payable credits 
  • RDEC, designed originally for large companies and certain subsidised or grant-funded projects 

From 1 April 2024, the government began implementing a unified approach that delivers relief predominantly through an above-the-line taxable credit. This change aims to simplify claims, increase transparency, and allow HMRC to more easily assess whether R&D activity delivers genuine commercial and economic impact. 

For businesses, the practical implications are significant; finance teams must be engaged earlier, and retrospective or poorly evidenced claims carry substantially higher risk. Increasingly, R&D tax relief is transitioning from a tactical tax benefit into a strategic financial and governance discipline. 

 

Policy Ambition vs Practical Reality 

Despite the scale of investment by the government and the stated ambition to drive economic growth through innovation, there is growing concern across the R&D community that policy intent and operational enforcement are not always aligned. 

Recent analysis from the Department for Science, Innovation and Technology (DSIT) rightly highlights how vital R&D tax relief is to the UK economy. However, the question remains whether DSIT and HMRC are fully aligned in how that ambition is translated into practice. HMRC’s Volume Compliance Approach, particularly within the ISBC unit, has had a chilling effect on legitimate claims, especially for innovative SMEs and early-stage businesses. 

For many start-ups and scale-ups, the resource required to respond to complex and often aggressive enquiry letters is simply unavailable. Combined with the challenges introduced by the Claim Notification Process and the reduction in SME relief rates, there is a real risk that valid R&D activity is left unsupported. 

This disconnects is crucial. If innovative businesses disengage from R&D tax relief due to perceived risk or uncertainty, the UK undermines the very outcomes this £55bn investment is designed to achieve. 

 

“R&D Tax Relief is under greater scrutiny than ever, particularly for innovative SMEs navigating the merged scheme, RDEC, and rising HMRC enquiries. Against this backdrop, the role of structured compliance and informed advisory support becomes critical; not just to protect claims, but to ensure innovation is not inadvertently stifled.” 

Malcolm Henderson, Compliance Director at Bonham & Brook, Former HMRC R&D Unit Leader 

 

How Businesses Can Prepare to Access R&D Funding 

At Bonham & Brook, we advise clients to treat R&D compliance as a growth enabler. With increasing scrutiny and evolving legislation, the ability to articulate your innovation story, clearly, credibly, and consistently, will determine your access to funding and your long-term competitiveness. 

To benefit from this £55bn government commitment, businesses must: 

  • Maintain robust, contemporaneous R&D documentation 
  • Clearly evidence technical uncertainty and advancement 
  • Align projects with qualifying R&D criteria 
  • Understand how HMRC evaluates and challenges R&D claims 

From 2026 and beyond, compliance will become the defining factor in successful R&D tax relief claims. Partnering with an experienced specialist R&D tax advisor will no longer be just an advantage, but an absolute necessity.  

 

Companies should start by reviewing their current R&D activities through the lens of commercial impact.  

  • Are your projects solving technical uncertainties?  
  • Are they contributing to sector-wide progress?  
  • Are you capturing evidence strong enough to support a claim under enquiry?  
  • Are you aligning your R&D activities with HMRC’s evolving definition of qualifying work? 
  • Are you engaging advisors early enough to shape documentation, rather than retrofitting evidence later? 

 

These questions are no longer optional; businesses need to be prepared.  

 

Looking Ahead  

 This £55 billion investment is a commitment in building the infrastructure for tomorrow’s breakthroughs. From AI to quantum computing, from clean energy to advanced manufacturing, the UK is laying the groundwork for a new industrial era.  

The businesses that will benefit most are those that engage early, invest in strong R&D governance, and align their innovation activity with national priorities. In the next phase of UK R&D, success will belong not just to the most innovative companies, but to the most prepared.  

 

 

At Bonham & Brook, we combine deep technical expertise with insider HMRC experience to help innovative businesses secure R&D tax relief with confidence, withstand scrutiny, and align innovation with commercial outcomes. 

If you’re re-evaluating your R&D strategy, planning future investment, or concerned about compliance under the merged scheme and RDEC, 

 

Contact the Bonham & Brook R&D specialists for a strategic R&D tax review

 

 

Malcolm Henderson

Associate Director

 

 

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