R&D tax credits for Chester businesses

What are R&D tax credits?

R&D (Research & Development) tax credits are a government-backed incentive that lets UK companies, including those in Chester, reclaim money spent on innovation. If your company works on technically challenging projects you could get cash back or a reduced tax bill, even if those projects fail.

What changed in April 2024?

For accounting periods starting before 1 April 2024, there were two R&D tax relief schemes:

• SME R&D relief - for small and medium-sized companies (the majority of Chester’s startups and growing firms)
• RDEC - for large companies or SMEs receiving grants (like Innovate UK)

From 1 April 2024, the SME and RDEC schemes merged into a single R&D scheme for most businesses. However, there’s still enhanced relief for R&D-intensive SMEs, where at least 40% of total business spend is on R&D. These companies qualify for a higher rate of refund.

How much could your Chester business get back?

Companies across Chester are regularly claiming thousands in R&D tax relief, some even tens of thousands. You can claim for up to two previous accounting periods.

Depending on your company type and R&D intensity:

• Loss-making R&D-intensive SMEs can claim up to 27p per £1 spent
• Other companies typically receive around 16.2p per £1 post-tax

If your team is solving technical problems or improving how things work, there’s a good chance you’re eligible.

What counts as R&D?

Many Chester founders don’t realise how broad the definition is. You don’t need to be in a lab. If you’re solving a technical or scientific uncertainty, it may qualify.

To qualify, your work must try to resolve a problem where the solution wasn’t easily available or known - this is called ‘technological uncertainty’.

Here are illustrative examples of eligible R&D activities happening in and around Chester:

• A logistics startup in Chester Business Park building a new route optimisation algorithm
• A jewellery manufacturer developing a cleaner, more durable coating process
• A digital agency in Chester integrating bespoke AI into client tools
• A food producer improving product shelf life using innovative techniques

R&D tax credit myths busted

Many Chester businesses assume they don’t qualify. Here are some common misconceptions:

How to claim R&D tax credits in Chester

The process includes:

1. Identifying your eligible R&D activities
2. Calculating qualifying costs
3. Writing a technical report
4. Submitting your claim to HMRC

Many businesses use our partner to do this right the first time. Submitting a strong, well-documented claim helps avoid HMRC delays and increases your chance of success.

How long until your business gets paid?

If you’ve never claimed before, you might wonder how fast you’ll see results. Here’s a typical timeline for Chester businesses using our partner:

Some Chester clients get their R&D refund in as little as four weeks. Note: HMRC processing times can vary, especially if there’s an enquiry or it’s a complex case.

Cash vs tax relief

Here’s how it works depending on your financial position:

• If you’re pre-revenue or loss-making, you’ll likely receive a cash payment
• If you’re profitable, you’ll get a reduction on your Corporation Tax

Either way, it’s real money for work you’ve already done.

Common mistakes made by Chester businesses

Here’s where we see many companies go wrong:

Our partner has helped thousands of UK companies to avoid these pitfalls.

How Chester Accountants can help

Our partner takes the guesswork out of the process. They provide:

• Guided claim process

  Step-by-step guidance through your entire R&D claim

• Xero integration

  Seamlessly connect your accounting data
• Expert review

  Every claim is reviewed by specialists before HMRC submission

• Comprehensive scheme support

  Full assistance with both SME and RDEC schemes

The cost is only 5% of the amount you receive (minimum £1,490 + VAT). You pay £490 upfront, which is deducted from the final fee if your claim is successful.

FAQs about R&D tax credits in Chester

How are R&D tax credits calculated?

It depends on your accounting period and company type. For accounting periods starting on or after 1 April 2024:

• Most companies get a 20% credit, which results in up to 16.2% benefit post-tax
• R&D-intensive, loss-making SMEs can receive up to 27% of their R&D spend as a cash payment

What costs can be claimed under R&D tax credits?

Chester businesses can usually claim for costs across five main categories:

• Staff costs

  Salaries, NICs, and pensions for team members working on R&D

• Subcontractor costs

  Only UK-based subcontractors are eligible from April 2024

• Agency or temporary workers

  Known as externally provided workers

• Consumables

  Materials and utilities used up during the R&D process

• Software

  Tools used directly in R&D (e.g. dev platforms, testing environments)

Important changes have been made for accounting periods starting on or after 1 April 2023:

• Cloud and data costs are now eligible. You can now include cloud hosting and data licensing costs (e.g. AWS, GCP, data subscriptions)
• Pure mathematics now counts. Maths-based research (like in AI, quantum computing, or deeptech) can now qualify.
• No more overseas R&D. Subcontracted R&D work done outside the UK is no longer eligible for periods starting after April 2024. This change encourages companies to keep innovation activity in the UK.

Can I claim R&D tax credits for unsuccessful projects?

Yes, R&D tax credits can be claimed for projects that sought to achieve an advance in science or technology, even if the project was unsuccessful. The key factor is the attempt to resolve technological uncertainties.​

How far back can I claim R&D tax credits?

You can typically claim R&D tax relief for the past two accounting periods. So if your business hasn’t claimed before, you might be able to submit two years' worth of claims at once.

Are there any changes to R&D tax credits in 2025?

The government updates the scheme regularly. The most recent changes came in:

• April 2023, including rate adjustments and new eligibility updates
• April 2024, including the merging of SME and RDEC schemes

Given HMRC has made major changes in recent years, Chester companies should stay informed. Working with a specialist can help ensure you don’t miss out.

Can I handle the R&D tax credit claim process myself?

Technically yes, but most Chester businesses prefer to use experts like our partner to avoid mistakes, maximise their claim, and stay compliant. A good partner can handle the technical report, calculations, and HMRC submission, all while saving you time and hassle.

Final thoughts

If you’re a Chester-based business working on any kind of innovation, whether it’s software, manufacturing, or internal tools, there’s a good chance you qualify for R&D tax relief.

You’ve already done the hard work. Now let our partner help you get the money back.

Want help figuring out if your project qualifies? Book your free call with a specialist and start your claim today.

About the author

Adam Thornhill is a seasoned entrepreneur and the author of Podup, a popular business newsletter read by founders, operators, and marketers across the UK. With years of hands-on experience growing and advising businesses, from high-growth startups to professional service firms, Adam brings practical insight into what actually works when running and scaling a company.

He has built and turned around multiple businesses in sectors ranging from healthcare to technology, always with a focus on real-world results. Adam distils key lessons from operators at the top of their game and shares them in a straight-talking, actionable format.

This page was last reviewed by Adam Thornhill on 21 May 2025.

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