How R&D tax credits make your business more attractive to investors

One factor that can significantly strengthen this picture is your ability to claim R&D tax relief. R&D tax incentives reward businesses that invest in innovation. When used effectively, they can reduce costs, extend your cash runway and demonstrate a disciplined approach to financial management. For investors, this is a compelling combination. Understanding whether you qualify and how to maximise the benefit is therefore essential.

‍How to know if your company is eligible for R&D tax relief

HMRC’s eligibility criteria are intentionally broad to ensure that innovation across many sectors can be supported. To qualify, your project must meet two core conditions.

It must aim to achieve an advance in science or technology. It must involve technical uncertainty, meaning a competent professional in your field could not easily work out the solution at the outset.

Importantly, projects do not need to succeed. Failed, abandoned or partially completed R&D can still qualify. You may also be eligible for R&D carried out for a client, provided the work meets legislative requirements.

Many businesses are unaware that their day-to-day problem solving is already eligible for relief. In fact, a significant proportion of our clients did not know the incentive existed before speaking with us.

‍What R&D costs can be claimed‍

If your work meets the qualifying criteria, you can typically claim for a range of associated expenditure. This may include:

• Staffing costs, including salaries, employer NICs and pension contributions
• Freelancer and subcontractor fees
• Relevant software licences used for the project
• Consumables used up in the R&D process, such as materials, heat and electricity
  

Claim values differ depending on the company size, the type of R&D and the accounting period in question, particularly since the introduction of the merged scheme in 2024. A specialist adviser can help you determine which rules apply to your circumstances.

R&D tax relief is available for businesses of all sizes‍

We support companies across every stage of growth, from early stage start ups to large multinational groups.

Start ups and SMEs

Small and medium sized companies can often benefit significantly from the SME scheme or from transitional rules now in place under the merged R&D Expenditure Credit. These businesses typically reinvest relief into hiring, product development or extending their cash runway.

Larger companies

Large organisations claim through the R&D Expenditure Credit. Although the percentage return is lower than for SMEs, the value of R&D undertaken at this scale means the relief can still be substantial. Relief is often reinvested into capital projects, new technologies or expanding research teams.

Across our client base, we have secured an average of sixty six thousand pounds in R&D relief per claim. That money goes directly back into innovation activity and future growth.

Why investors place such high value on R&D tax credits

R&D tax relief enhances the value of innovation expenditure by either reducing corporation tax liabilities or providing a cash credit if the company is loss making. This can make a business considerably more attractive to investors for several reasons.

Stronger cash position

Many early stage companies seek investment to support staffing, development or infrastructure. R&D claims can fund part of these costs directly, reducing the level of external financing required. Investors see this as a sign of financial maturity and prudent cost management.

Improved operational efficiency

By reinvesting tax savings into new hires, training, technology or equipment, companies can accelerate project delivery and strengthen their competitive position. This demonstrates a clear growth strategy and a strong return on investment.

Higher valuations

Accessing R&D tax relief helps to preserve equity during funding rounds. When businesses reduce their reliance on investor capital and extend their cash runway, they are often able to command higher valuations. For founders, this means retaining more ownership as the business grows.

Reduced investor risk

Investors prioritise businesses that can demonstrate predictable funding, stability and compliance. R&D tax relief offers all three. Because relief is based on actual innovation activity rather than speculative projections, investors view it as a low risk mechanism for enhancing company value.

Preparing for investment with a strong R&D claim

A well prepared R&D tax relief claim does more than reduce costs. It provides evidence of disciplined record keeping, robust financial planning and a genuine commitment to innovation. These are qualities every investor wants to see.

At Kene, we build every claim with a clear methodology and defensible evidence from the outset. This ensures your claim delivers maximum value and can withstand scrutiny from HMRC, giving both you and your investors confidence.

If you want to understand whether your business qualifies for R&D tax relief or how to position your innovation in advance of investment, you can take our free eligibility assessment or speak with one of our advisers for personalised guidance.