R&D tax credit loans: borrow against your expected R&D tax relief

An R&D tax credit loan lets your company borrow now against relief it expects HMRC to pay later, then clear the loan when that payment arrives. Most lenders follow a similar path.

1. Claim preparation: your accountant or R&D adviser prepares the claim, the technical report, the additional information form and, where needed, the claim notification.
2. Lender review: the lender checks how the claim was prepared, your claim history, your accounts and your bank statements.
3. Offer: the lender offers to advance part of the cash it expects your company to receive, with its charges and an expected repayment date.
4. Documents and security: you sign the agreement, often with a debenture and a personal guarantee from one or more directors.
5. Funds released: the advance is paid to your company, before or after the Company Tax Return is filed, depending on the lender.
6. Repayment: when HMRC pays your company, you repay the advance plus charges from that money.

If HMRC takes longer than expected, the loan normally stays open and charges continue, so timing is the biggest factor in what you pay.

For accounting periods beginning on or after 1 April 2024, R&D relief is claimed under either the merged scheme or Enhanced R&D Intensive Support (ERIS). Which applies shapes how much cash HMRC is likely to pay, and so how much a lender may advance.

The merged scheme

The merged scheme gives an expenditure credit of 20% of qualifying R&D spending, with different rates for ring-fenced trades. The credit is taxable trading income, so the net benefit is lower than the headline rate. HMRC first sets it against Corporation Tax and certain other HMRC debts, and pays out any balance only if going-concern conditions are met.

Enhanced R&D Intensive Support (ERIS)

ERIS is for loss-making SMEs that are R&D intensive, broadly meaning relevant R&D spending is at least 30% of total expenditure, including connected companies. It gives an extra 86% deduction and a payable tax credit of up to 14.5% of the surrenderable loss. A company cannot claim both schemes on the same spending.

Rules lenders will check

• PAYE cap: payable credits are capped at £20,000 plus 300% of relevant PAYE and National Insurance liabilities, unless an exemption applies.
• Claim notification: a company claiming for the first time, or whose last claim was more than three years earlier, must notify HMRC within six months of the end of the period of account, or the claim is invalid.
• Additional information form: this must reach HMRC on or before the date the claim is made, or the claim is invalid.
• Set-off: money your company owes HMRC, such as VAT or Corporation Tax, may be cleared from the credit first.

Lenders size offers on the cash they expect you to receive, not the gross relief, so your accountant or R&D adviser should confirm which scheme applies.

For new arrangements, generally no. New assignments of R&D tax credit payments made on or after 22 November 2023 are void, and for claims made on or after 1 April 2024 HMRC generally pays the credit directly to the claimant company rather than to a nominee such as a lender or adviser.

There are narrow exceptions, such as assignments made under agreements entered into before 22 November 2023, but they rarely help a new borrower. In practice, lenders rely on your company repaying once the HMRC payment reaches your bank account.

To manage that risk, lenders typically ask for a debenture over the company's assets, a personal guarantee from directors and a commitment to repay as soon as HMRC pays. A guarantee may still be called on if HMRC reduces, rejects or delays the claim.

Most R&D tax credit loans are priced as short-term borrowing: a monthly charge while the money is outstanding, plus fees. The total cost depends mainly on how long HMRC takes to pay.

• Interest or monthly fee: charged each month on the amount advanced, sometimes with a minimum charging period.
• Arrangement fee: often a percentage of the advance, which may be deducted from the funds you receive.
• Extension charges: if HMRC pays late, charges usually continue, and some lenders raise the rate after a set date.
• Legal and review costs: some lenders charge for reviewing the claim or preparing security documents.

Lenders price on claim quality, who prepared it, your claim history, your finances and the expected wait. Compare offers on total cost of credit, meaning everything you repay minus what you receive, using a realistic timeline.

Illustrative example only: actual costs depend on the lender and your circumstances.

Imagine a software company expects HMRC to pay it £100,000 once its R&D claim is processed. A lender advances £70,000, with an arrangement fee of 2% of the advance and a monthly charge of 1.5% of the advance.

• Advance: £70,000
• Arrangement fee: £1,400 (2% of £70,000)
• Monthly charge: £1,050 (1.5% of £70,000)
• If HMRC pays after four months: monthly charges of £4,200, total cost £5,600, so the company repays £75,600 and keeps £24,400
• If HMRC pays after six months: monthly charges of £6,300, total cost £7,700, so the company repays £77,700 and keeps £22,300

The two-month delay adds £2,100. If HMRC paid only £60,000, the company would still owe at least £77,700.

Lenders usually advance a proportion of the cash your company is expected to receive from HMRC, not the full amount. The proportion depends on how confident they are that the claim will be paid in full and on time.

• The expected net cash payment after any set-off and the PAYE cap
• Who prepared the claim and the quality of the technical report
• Your claim history, including any HMRC enquiries
• Whether the Company Tax Return has been filed
• Your wider finances and other borrowing

In-year funding against spending to date is less common and usually priced higher. For a wider view, read our guide on how much a limited company can borrow.

The main risk is that HMRC pays later, pays less or opens a compliance check, while your company still owes the lender in full.

• Compliance checks: HMRC can open a check into a claim, which may delay payment for months. Ask what the lender charges in the meantime.
• Shortfalls: if the claim is reduced or rejected, the company must still repay, and directors may be asked to pay under a guarantee.
• Long-stop date: many agreements set a date by which the loan must be repaid, even if HMRC has not paid.
• Security and early settlement: understand what a debenture covers, whether an existing lender must consent, and any minimum charges.
• Adviser fees: if your R&D adviser charges a percentage of the claim, check that their fee plus the lender's charges still leaves you better off.

An R&D tax credit loan fits best when the claim is solid and the problem is timing. If you need more, or longer-term funding, consider these.

• Unsecured business loans: fixed monthly repayments over an agreed term, not linked to HMRC. Often better if you need more than the claim is worth or want to spread repayments.
• Revolving credit facility: a limit you can draw, repay and draw again. Useful when R&D spending creates repeated, uneven gaps through the year.
• Growth finance: larger, structured funding for companies that are scaling, where the R&D claim is only one part of the picture.

Often yes. Losses are common in R&D-intensive companies and ERIS is aimed at loss-making SMEs, so lenders focus on the strength of the claim, although they still check credit and finances.

A first claim with no track record with HMRC can be harder, and lenders set their own minimum trading periods. Adverse credit, such as missed payments or county court judgments, may reduce the advance or rule out some lenders. Each lender makes its own decision.

Business lending to a limited company, LLP or partnership of four or more partners is generally unregulated, so most Consumer Credit Act protections do not apply. Your rights come mainly from the loan agreement and any guarantee you sign.

Read the full terms, including events of default, long-stop dates and guarantee wording, and take independent legal or financial advice if anything is unclear. Our guide to regulated vs unregulated business finance explains more. Welcome Finance is a broker, not a lender, and is not authorised or regulated by the FCA.

We find lenders on our panel that fund R&D claims, and a dedicated relationship manager stays with you by phone, email and chat from first enquiry until the lender pays out.

1. Check your eligibility in about 60 seconds, without affecting your credit score.
2. Tell your relationship manager about your claim, who prepared it and when you need funds.
3. We approach suitable lenders and explain offers in plain English, including charges, long-stop dates and security.
4. You decide whether to apply. The lender runs its own credit checks and makes its own decision.
5. Once approved and signed, the lender pays the funds to your company.

We don't charge you a fee. We are paid a commission by the lender when your finance completes, and you can ask how much it will be. Commission can differ between lenders. See how we are paid for details.

Can HMRC pay the R&D credit straight to the lender?

Generally not for new claims. HMRC now pays R&D credits to the claimant company, apart from narrow exceptions, so the lender relies on your company repaying.

How long does HMRC take to pay an R&D claim?

Processing times vary from claim to claim. Plan for delays, especially if HMRC asks questions or opens a compliance check.

What happens if HMRC opens a compliance check?

Payment is usually held until the check is resolved. The loan normally stays open, charges continue and the long-stop date becomes important.

Does it matter who prepared my claim?

Yes. Lenders usually prefer claims prepared by an accountant or experienced R&D adviser, and may lend less if they have concerns.

Can we borrow against an ERIS claim?

Often, yes. Lenders look at the expected payable credit, the R&D intensity calculation and the PAYE cap.

What if my company owes HMRC money?

HMRC may use the credit to clear other HMRC debts first. Tell the lender about any arrears or Time to Pay arrangements, because they reduce the cash you receive.

Can we borrow before our accounting period ends?

A few lenders offer in-year funding against spending to date, assessed case by case and usually priced higher.

Can we use the funds for anything?

The funds are for business purposes, such as salaries, contractors and project costs. Lenders may ask how you plan to use them.