R&D Tax Credits for London Fintech Startups: A Step-by-Step Claim Guide
By Acumen AGCUpdated April 202612 min read
If your fintech is building anything beyond off-the-shelf software — a new payments engine, a fraud-detection model, a novel API integration — HMRC may owe you money. R&D tax credits are one of the most underused reliefs available to London startups. Here’s exactly how to claim them.
What qualifies as R&D in fintech?
HMRC’s definition of R&D is deliberately broad — and often misunderstood. You don’t need a lab coat. Under the BEIS guidelines, qualifying R&D is any project that seeks to advance science or technology by resolving scientific or technological uncertainty.
For fintech specifically, this includes a wide range of activities that many founders wrongly assume are “just normal development”:
- Building proprietary machine learning models for credit scoring, fraud detection, or transaction categorisation
- Developing novel cryptographic or tokenisation methods
- Creating interoperability layers between incompatible banking APIs (e.g. Open Banking, SWIFT, card networks)
- Architecting real-time settlement or reconciliation engines at scale
- Researching regulatory-compliant data architectures (GDPR + PSD2 simultaneously)
- Building embedded finance infrastructure that doesn’t yet exist in commercial form
Key test: Could a competent professional in your field have solved this problem using readily available knowledge? If not — it’s likely qualifying R&D.
Routine software development, bug fixing, and replicating existing commercial solutions do not qualify. The boundary matters, and documenting it carefully is essential.
SME vs RDEC scheme — which applies to you?
From April 2024, HMRC merged the two historic schemes into a single, simplified framework for most companies. However, the distinction between SME and large company treatment still affects your effective relief rate.
Most startups
SME scheme (merged)
- Under 500 employees
- Turnover ≤ €100m or balance sheet ≤ €86m
- Enhanced deduction: 186% on qualifying costs
- Loss-making: cash credit up to 10% of losses (14.5% intensive)
- R&D intensive: ≥30% of spend qualifies for higher rate
Larger companies
RDEC (above threshold)
- 500+ employees or above turnover/balance sheet limits
- Credit rate: 20% of qualifying spend
- Credit is taxable — net benefit ~16.2% after CT
- Credit shown “above the line” in accounts
- Counts towards profitability metrics
Subsidised costs: If your R&D was funded by a grant, SBRI contract, or Innovate UK award, those costs typically fall into the RDEC route even if you’re an SME — seek specialist advice before claiming.
Qualifying costs: staff, software, contractors
Staff costs
This is usually the largest qualifying cost category. You can include salary, employer NICs, and employer pension contributions for employees directly engaged in R&D. This includes technical founders, engineers, data scientists, and product managers where their time is attributable to qualifying projects. You can also include 65% of costs for employees who provide direct support (e.g. a finance analyst building internal R&D tooling).
Externally provided workers (contractors)
If you use contractors through a third-party staffing agency, you can claim 65% of the cost. If the contractor is an individual engaged directly (inside IR35 or via their own PSC), the rules are more nuanced — document the engagement type carefully.
Software and cloud computing
From April 2023, cloud computing and data costs are explicitly qualifying. This includes AWS, GCP, or Azure costs directly attributable to R&D workloads — not your general infrastructure. You’ll need to apportion costs between R&D and non-R&D usage, which requires logging or estimation methodology.
Consumables and data costs
Datasets used in training or testing models, purchased APIs used exclusively for R&D, and materials used in prototyping may qualify. Costs that are also used commercially must be apportioned.
What doesn’t qualify: Capital expenditure (hardware, equipment), rent, general admin, marketing costs, legal/accounting fees, and patent costs are all excluded.
How much can you claim? Real examples
Example A — Loss-making fintech startup (standard rate)
Total qualifying R&D spend£200,000
Enhanced deduction (186%)£372,000
Additional deduction£172,000
Cash credit rate (loss-making, 10%)10%
Cash repayable from HMRC£17,200
Example B — R&D intensive startup (≥30% of spend is qualifying)
Total qualifying R&D spend£200,000
Enhanced deduction (186%)£372,000
Cash credit rate (intensive, 14.5%)14.5%
Cash repayable from HMRC£24,940
Example C — Profitable fintech, SME scheme
Total qualifying R&D spend£300,000
Enhanced deduction reduces taxable profit£258,000
Corporation tax saved (25%)£64,500
Effective benefit (% of R&D spend)21.5%
Figures based on rates current as of April 2026. Rates may vary; always verify with a qualified adviser.
HMRC’s increased scrutiny — how to avoid rejection
HMRC opened a dedicated R&D compliance unit in 2023 and has dramatically increased enquiry rates, particularly for tech and fintech claims. Common triggers for rejection include:
- Generic technical narratives — descriptions that could apply to any software project without demonstrating specific technological uncertainty
- Including routine maintenance — bug fixes, UI changes, and performance tweaks on existing systems don’t qualify
- Overclaiming staff time — claiming 100% of an engineer’s time when they clearly work on non-R&D tasks
- Missing the August 2023 deadline rule — claims must now be made within 2 years of the end of the accounting period
- No Additional Information Form (AIF) — mandatory since August 2023; claims without it are invalid
New requirement: Since August 2023, all R&D claims require a pre-notification if you haven’t claimed before (or not in the last 3 years), submitted within 6 months of your accounting period end.
How to protect your claim
Keep contemporaneous records — project logs, sprint documentation, Jira tickets, code comments, and meeting notes. Write technical narratives project-by-project with specific detail about what the uncertainty was and how you resolved it. Have a technical director or CTO sign off on the R&D narrative, not just your accountant.
Timeline from claim to cash
Step 1 · Before year end
Track qualifying costs in real time
Tag R&D projects in your accounting system (Xero, QuickBooks). Record time allocations monthly, not retrospectively.
Step 2 · Within 6 months of year end
Submit pre-notification (if first claim)
Use HMRC’s online service. Required for new claimants or those who haven’t claimed in 3+ years. Missing this deadline forfeits the claim.
Step 3 · Accounts preparation
Prepare technical & financial documentation
Draft R&D technical narrative, compile cost schedules, apportion staff time. This is where specialist R&D advisers add the most value.
Step 4 · CT600 submission
File corporation tax return with R&D claim
Submit AIF (Additional Information Form) via HMRC online before or at the same time as the CT600. Must be within 2 years of accounting period end.
Step 5 · 4–8 weeks
HMRC processing
Standard repayment claims are typically processed in 4–8 weeks. Enquiry cases can take 6–18 months — good documentation minimises this risk.
Step 6
Cash received
Repayable credit lands in your bank account. Profitable companies receive a reduction in CT liability at payment date instead.
Frequently asked questions
Can pre-revenue startups claim?
Yes. Loss-making companies — including pre-revenue startups — are often the biggest beneficiaries of the SME scheme, receiving a cash payment rather than a tax reduction.
We used offshore contractors. Can we still claim?
As of April 2024, the rules have tightened. Overseas subcontractor costs generally no longer qualify unless the work couldn’t reasonably be done in the UK (e.g. specific geography or regulatory requirement). UK-based subcontractors remain claimable at 65%.
We received Innovate UK funding. Does that affect our claim?
Yes — subsidised R&D expenditure (grant-funded projects) must be claimed under RDEC rather than the SME scheme, reducing the effective benefit. You can still claim, but the calculation changes.
Can we claim for previous years?
Yes, up to 2 years after the end of the accounting period. If you’ve never claimed and have been doing qualifying R&D, you may be able to recover credits from two prior financial years.
Do we need a specialist R&D adviser, or can our accountant do it?
A general accountant can file the claim, but the quality of the technical narrative — the part that HMRC scrutinises most — benefits significantly from a specialist who understands both software development and HMRC’s current compliance focus. Given increased enquiry rates, this is particularly true for fintech claims above £50k.
Ready to find out what your fintech could claim?
Acumen AGC works with London fintech startups to identify qualifying R&D costs, prepare robust technical narratives, and manage the claim process end to end — reducing enquiry risk and maximising your relief.Get a free R&D assessment ↗
