10 Common Mistakes When Claiming R&D Tax Credits (And How to Avoid Them)
HMRC rejects or challenges thousands of R&D tax credit claims every year. Most of these issues are completely avoidable. Here are the ten most common mistakes and how to steer clear of them.
1. Claiming Routine Work as R&D
The single most common mistake is including routine, standard, or well-established work in an R&D claim. HMRC defines R&D as work that overcomes scientific or technological uncertainty. If the solution was obvious from existing knowledge, it does not qualify.
This trap catches businesses in every sector. Software companies claim standard website builds. Manufacturers claim regular maintenance. Food producers claim minor recipe tweaks. All of these fall outside HMRC's definition.
The fix is rigorous project assessment before including anything in the claim. Each project must be evaluated against HMRC's criteria: was there genuine uncertainty, and did the work seek to advance the state of the art? If the answer to either is no, exclude it.
2. Weak Technical Narratives
A strong claim tells a convincing technical story. Weak narratives describe commercial outcomes rather than technical challenges. They say 'we built a new product' instead of 'we overcame a materials compatibility problem that had no established solution.'
HMRC reviewers are looking for evidence of systematic investigation. They want to see what was unknown at the outset, what approaches were tried, what failed, what succeeded, and how the overall capability advanced. Vague or generic descriptions invite challenge.
The technical narrative should be written for an intelligent but non-specialist reader. Avoid excessive jargon, but do not oversimplify the technical challenge. The goal is clarity about why the work was genuinely innovative.
3. Incorrect Cost Allocation
Many businesses either underclaim costs or incorrectly assign non-qualifying costs to their R&D claim. Common errors include claiming 100% of a staff member's time when only 40% was spent on R&D, or including overhead costs that are not directly related to qualifying activities.
The correct approach is to track time and costs against specific R&D projects. Use timesheets, project codes, or other documentation that links expenditure directly to qualifying work. Estimates and broad percentages invite HMRC scrutiny.
Utilities and consumables should be allocated based on actual R&D usage where possible. If your R&D facility uses 30% of the company's total electricity, a proportional claim is reasonable. A blanket 100% claim is not.
4. Missing Contemporaneous Evidence
HMRC strongly prefers claims backed by evidence created at the time the R&D work happened. Emails discussing technical problems, project briefs, design documents, test results, and meeting notes all help demonstrate that the work was genuinely innovative and systematic.
Retrospective claims without supporting evidence are much harder to defend. If your only documentation is a narrative written months after the work finished, HMRC has grounds to question whether the uncertainty was real or constructed for the claim.
The solution is to maintain good project records as a matter of course. Even if you are not currently planning a claim, documenting technical challenges and approaches creates invaluable evidence if you decide to claim in the future.
5. Using the Wrong Scheme
Since April 2024, most businesses claim under the merged RDEC scheme. However, some businesses with specific circumstances may need to use different provisions. Using the wrong scheme or misunderstanding the rates can significantly affect the claim value.
R&D-intensive SMEs, companies with connected parties, and businesses with complex funding arrangements may have special rules that apply. Getting the scheme wrong can result in underclaiming, overclaiming, or outright rejection.
Working with a specialist who understands the current legislative landscape ensures your claim is submitted under the correct provisions with the right rates applied. This is particularly important during the transition period following the April 2024 merger.
6. Failing to Include Failed Projects
Businesses often exclude failed or abandoned projects from their claims, assuming that only successful work qualifies. This is incorrect. HMRC explicitly recognises that failed projects involve genuine attempts to overcome uncertainty, which is the core of R&D.
Failed projects can be particularly valuable for a claim because they demonstrate uncertainty more clearly than successful ones. A project where every approach worked perfectly raises questions about whether uncertainty existed at all.
Include failed projects with clear documentation of what was attempted, why it failed, and what was learned. This strengthens the overall credibility of the claim and shows HMRC that the work was genuine research rather than routine development.
7. Overclaiming Subcontractor Costs
Subcontractor costs are frequently mishandled in R&D claims. Under the merged scheme, only the company that directed and initiated the R&D can claim subcontractor costs. The subcontractor itself generally cannot claim for the same work.
Some businesses claim subcontractor costs that are not genuinely R&D-related, such as routine IT support, standard accounting services, or general consulting. Only subcontractor work that directly contributes to overcoming technological uncertainty qualifies.
Review contracts carefully to ensure your company, not the subcontractor, bears the technical risk and direction of the work. Maintain documentation showing your company's oversight and the specific technical challenges the subcontractor was engaged to solve.
8. Inconsistent Information Across Filings
R&D tax credit claims must align with other information submitted to HMRC. Inconsistencies between your R&D claim and your Corporation Tax return, company accounts, or CT600 form raise red flags and frequently trigger enquiries.
Common inconsistencies include different R&D expenditure figures in the claim and the tax return, mismatched project dates, or descriptions of R&D activities that do not match the company's stated business activities in its accounts.
The solution is to prepare the R&D claim as an integrated part of your tax filing, not as a separate add-on. All figures should be reconciled, and the narrative should be consistent with your overall business description.
9. Missing the Deadline
R&D tax credit claims must be submitted within two years of the end of the accounting period in which the R&D expenditure was incurred. Many businesses discover the scheme too late and miss the deadline for valuable historical claims.
For a company with a December year-end, R&D expenditure incurred in 2024 must be claimed by December 2026. Missing this window means the tax relief is permanently lost, regardless of how strong the underlying claim might have been.
Set a calendar reminder to review R&D claims at least once per year, ideally well before the two-year deadline. This gives time to identify qualifying work, gather evidence, and prepare a thorough claim without rushing.
10. Going It Alone
While it is possible to prepare an R&D tax credit claim without professional help, the complexity of HMRC's requirements and the risk of errors makes this a false economy for most businesses. Specialist advisers typically increase claim values significantly while reducing the risk of enquiries.
Generalist accountants often lack the technical depth to identify all qualifying projects or write persuasive technical narratives. A claim prepared in-house may capture only the most obvious work, leaving substantial relief unclaimed.
RD Tax Consultant works exclusively on R&D tax credit claims, bringing technical expertise and deep HMRC knowledge to every engagement. Our clients typically recover significantly more than they would through self-prepared claims, with the added confidence that everything is compliant and well-documented.
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