Common Mistakes Businesses Make When Claiming R&D Tax Credits (And How to Avoid Them)
Introduction
The R&D tax credit scheme is one of the UK’s most generous incentives for innovation, allowing businesses to recover a portion of their research and development costs. However, due to the technical nature of the scheme and HMRC’s increasing scrutiny, many businesses unknowingly make errors in their claims—leading to delays, reduced relief, or even HMRC enquiries.
In this article, we outline the most common mistakes UK businesses make when claiming R&D tax credits—and how to avoid them to ensure your claim is accurate, compliant, and successful.
1. Misunderstanding What Qualifies as R&D
Mistake: Assuming all product development or process improvements qualify as R&D.
Many businesses think any form of innovation or technical work is eligible, but HMRC has strict criteria. Projects must involve:
- A clear scientific or technological uncertainty
- An attempt to achieve an advance in knowledge or capability
- A process of systematic investigation or experimentation
How to avoid it: Familiarise yourself with the BEIS Guidelines on R&D for Tax Purposes and work with a specialist who understands what truly qualifies.
2. Inadequate Technical Justification
Mistake: Failing to explain the technical challenges and innovations clearly.
HMRC needs to understand the nature of your R&D work. Vague or high-level descriptions are often flagged for further scrutiny.
How to avoid it: Provide a clear, jargon-free narrative outlining the problems you were solving, why they were challenging, and how you attempted to solve them.
3. Incorrect Cost Allocations
Mistake: Including non-qualifying costs or excluding eligible ones.
Common errors include:
- Overstating director salaries or subcontractor fees
- Failing to apportion costs between R&D and non-R&D activities
- Missing eligible costs like software or consumables
How to avoid it: Ensure a detailed and accurate breakdown of eligible costs. Use time tracking and payroll data to support staff cost allocations.
4. Poor Record-Keeping
Mistake: Not keeping sufficient evidence of R&D activity.
Without proper documentation, it becomes harder to justify your claim if HMRC opens an enquiry.
How to avoid it: Maintain records of:
- Project plans and reports
- Meeting notes
- Test results and data
- Time spent on R&D by employees
5. Claiming Without Expert Support
Mistake: Relying solely on your accountant or in-house team without R&D tax credit expertise.
While many accountants are capable, R&D tax relief is a specialist field that requires both technical and tax knowledge.
How to avoid it: Engage a specialist like R&D Enquiries to ensure your claim is technically robust, fully compliant, and ready to withstand HMRC scrutiny.
6. Submitting Incomplete or Inconsistent Claims
Mistake: Failing to align the technical narrative with the financial data or omitting necessary sections.
Discrepancies between the financial and technical sides of the claim can prompt questions from HMRC.
How to avoid it: Ensure all sections of your claim are internally consistent, and review the entire submission carefully before filing.
7. Not Preparing for an HMRC Enquiry
Mistake: Assuming your claim won’t be questioned and not preparing a defence.
As HMRC tightens enforcement, more claims are being selected for enquiry—even legitimate ones.
How to avoid it: Document your work thoroughly and have a plan in place to respond quickly and confidently to any HMRC enquiry.
Final Thoughts
Claiming R&D tax credits can be a powerful way to fuel growth and innovation—but only if it’s done right. Avoiding these common mistakes helps protect your business from delays, rejections, and unwanted HMRC attention.
At R&D Enquiries, we specialise in supporting businesses through every stage of the R&D tax relief process, including helping clients respond to and overcome HMRC enquiries.
👉 Contact us today to ensure your R&D claim is accurate, compliant, and fully maximised.