R&D tax credits, explained for founders who hate tax

If your startup writes code, runs experiments, or builds hardware to solve something nobody has cleanly solved before, a government somewhere probably owes you money back. Most founders never claim it — here's how the three big schemes work.

By the Plutus team · Updated June 2026 · 6 min read

R&D tax credits are exactly what the name says: the state reimburses part of what you spend trying to resolve genuine technical uncertainty. It is non-dilutive — you give up no equity — and it stacks on top of grants and a funding round. The catch is that the rules are written for accountants, not founders, so most early teams either skip it or under-claim. Here is the founder-level version for the UK, US and Singapore.

United Kingdom — the merged R&D scheme

For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes were merged into a single R&D Expenditure Credit. It gives a taxable above-the-line credit of 20% of qualifying R&D spend (worth roughly 15% net after corporation tax).

Loss-making, R&D-intensive SMEs get a better deal through Enhanced R&D Intensive Support (ERIS): if qualifying R&D is at least 30% of total spend, the relief rate is materially higher and can be taken as a cash credit — the version that matters when you are pre-profit.

• Qualifying costs: staff, subcontractors, software, cloud/data, consumables used in the R&D.
• You claim through your Corporation Tax return (CT600), and an Additional Information Form is now mandatory.
• The work must seek an advance in science or technology — not just be new to you.

United States — the payroll-tax R&D credit

The federal R&D credit (IRC §41) is normally an income-tax credit, which is useless to a startup with no income tax to pay. The unlock for startups is the payroll-tax offset: a Qualified Small Business (broadly under $5M in gross receipts and within its first five years of revenue) can apply the credit against employer payroll taxes — up to $500,000 a year since the Inflation Reduction Act raised the cap.

That means a pre-profit US startup can convert qualifying engineering and research salaries into real cash back against payroll, quarter by quarter. Note that §174 R&D cost treatment has shifted in recent years — this is the one area to confirm with a CPA for your current tax year.

Singapore — the Enterprise Innovation Scheme

Singapore's Enterprise Innovation Scheme (EIS), introduced in Budget 2023, offers enhanced tax deductions of up to 400% on the first tranche of qualifying innovation spend each year — including R&D, IP registration and approved training. Eligible businesses can also convert part of the benefit into a cash payout, which is the lever that helps a young, non-profitable company.

What actually trips founders up

1. Not knowing it applies pre-revenue. All three schemes have cash routes designed for loss-making companies. "We're not profitable yet" is not a reason to skip it.
2. Weak technical narrative. Claims get challenged when the write-up describes a product, not the technical uncertainty you resolved. Document the unknowns, the experiments, the dead ends.
3. Under-counting eligible cost. Cloud compute, contractor time and a portion of software licences often qualify and get left out.

Sources: HMRC R&D relief · IRS Research Credit · IRAS.