If you've ever searched “how to get R&D tax credit” for your business, you're not alone. Thousands of UK companies explore R&D tax relief every year, but many miss out on valuable funding because of avoidable mistakes. The tax rules are complex and have changed frequently in recent years. While the incentive is designed to encourage innovation, the application process can be challenging.

In this article, we'll walk through the most common pitfalls businesses face when claiming R&D tax credits, share real-life examples of what can go wrong, and answer frequently asked questions. By the end, you'll have a clearer understanding of how to get R&D tax credit successfully, with less stress and a higher chance of maximising your claim.

Misunderstanding What Counts as R&D

One of the biggest mistakes is assuming R&D only applies to scientists in lab coats or tech giants developing ground-breaking software. In reality, R&D tax credits are available to companies within the charge to UK Corporation Tax and not just companies in specific industries. However, a company must be seeking to resolve scientific or technological uncertainty in its industry for the project to count as R&D, or it will not be able to claim. 

The key test: Does your project seek to resolve scientific or technological uncertainty?

Example:

A publishing company claimed R&D tax credits in respect of several projects to make books in the company's digital archives available as searchable resources. The company was unable to demonstrate that the projects made an advance in science or technology, so the claim was rejected. This increased the company's Corporation Tax bill by over £50,000. See Flame Tree Publishing Ltd v HMRC [2024].

Understanding whether you have a valid R&D project before making a claim will avoid unnecessary advisory and tax costs.

Failing to Keep Proper Records

Without detailed records, proving your claim to HMRC is tough. Many businesses try to claim retrospectively, only to realise they can't justify their figures. Retrospective claims have also become more difficult since the introduction of HMRC's advanced notification requirement. 

Keeping accurate records of those involved in R&D projects, the time they have spent on qualifying R&D activities and the costs attributed to such activities is crucial for making a defendable R&D claim. The business must explain why the activities/costs qualify. If the business is able to explain which activities/costs have been excluded from an R&D claim, it shows to HMRC that the business has been thorough when preparing the claim and has a good understanding of the tax legislation. 

Example:

A software development company failed to provide records which proved the business had incurred R&D expenditure. The claim failed, and a negative tax adjustment of £400k was made to the company's tax returns. See Teksolutions-Inc Ltd v HMRC.

A claim for R&D tax credits is usually made many months, even years, after the R&D project began. Keeping contemporaneous records will allow the company to maximise R&D tax relief when it is time to make the claim. 

Overclaiming or Including Ineligible Costs

A company can only claim for the eligible costs attributable to an R&D project. For example, staff costs, subcontractor costs and cloud computing. Ineligible costs must be excluded. Submitting inflated claims is risky. HMRC may reject the application or open an enquiry, which will be expensive and time-consuming for the business. 

Further details regarding eligible costs can be found here. 

Ignoring Staff Contributions

A common oversight is failing to include staff who are indirectly contributing to R&D. ‘Qualifying indirect activities' can qualify for R&D tax credits. These are activities which form part of a project but do not directly contribute to the resolution of scientific or technological uncertainty. This may include the preparation of a report of R&D findings, providing training that is required to directly support an R&D project, or feasibility studies to inform the direction of an R&D activity. 

Including qualifying indirect activities as part of the claim will help to increase the cash savings for the business. 

Missing the Claim Deadline

Claims for R&D tax relief must be made in the company's tax return (CT600). This can be in the original submitted return or via an amended return. The time limit for submission of the R&D tax credit claim depends on the accounting period:

• For accounting periods beginning before 1 April 2023, the R&D claim must be submitted by the first anniversary of the filing date for the company's tax return for the accounting period for which the claim is being made.
• For accounting periods beginning on or after 1 April 2023, the R&D claim must be submitted within two years of the end of the period of account on which the return is based. The exception is where the period of account is longer than 18 months, in which case the time limit is 42 months from the start of the period.

Example:

A company's accounting period was the calendar year ending 31 December 2023. The R&D claim would need to be submitted to HMRC by 31 December 2025.

If a company makes a claim for SME R&D relief but is subsequently found to be ineligible, the company may be able to claim under the RDEC scheme within 30 days. 

In addition to the claim being included in the return, the requirements also need to be considered as part of the R&D claim process:

• For companies claiming RDEC and SME payable tax credits, it is necessary to complete and submit the CT600L supplementary page along with the CT600.
• For accounting periods beginning on or after 1 April 2023, first-time claimants, or those whose last claim was made more than three years before the last date of the 'claim notification period', are required to notify HMRC within six months from the end of the relevant period of account of their intention to make an R&D claim.
• For claims made from 8 August 2023, they must be supported by an AIF.

Submitting Weak Technical Narratives

HMRC wants to understand the uncertainty and advancement involved.

Since August 2023, an Additional Information Form (AIF) must be submitted before, or at the same time as, the CT600 Corporation Tax return (where R&D tax credits are claimed). The AIF must include:

• A description of the R&D undertaken during the period. The number of projects that require description will depend on how many projects are being claimed overall. 
• Details of qualifying costs.
• Contract details of any adviser who has supported the claim.
• Sign off from a senior officer of the company.

Vague descriptions increase the risk of rejection. HMRC have issued warnings where businesses have not completed the AIF correctly.  

FAQs on How to Get R&D Tax Credit

1. How do I know if my project qualifies for R&D tax credits?

If your project involved solving scientific or technological uncertainties that weren't obvious to a competent professional, you may qualify. It's not about whether the project succeeded—it's about the attempt to innovate.

2. Can loss-making companies claim R&D tax credits?
Yes. Loss-making SMEs can claim and may be eligible for a cash refund - this can provide valuable cash flow for growing businesses.

3. What costs can I include in my R&D claim?
Qualifying costs usually include staff salaries, employer NIC and pension contributions, subcontractors, externally provided workers, materials, software, and utilities directly linked to the R&D activity. Further information can be found here. 

4. What happens if HMRC rejects my R&D claim?
HMRC may reduce or disallow your claim. In serious cases of careless or deliberate errors, they can impose penalties. Strong records and narratives reduce the risk of rejection. If you believe your claim is valid, you can appeal. At this stage, it may be worth engaging with a professional who can help assess the validity of your claim. 

5. Can I claim R&D tax credits if my project failed?
Yes! Failed projects often highlight genuine scientific or technological uncertainty. 

6. Do I need an R&D adviser to claim?
Not legally, but working with an adviser increases your chances of maximising the claim, avoiding mistakes, and receiving payment more quickly. There have been many advisers who have promoted bad practice, and HMRC is cracking down on such agents.

Final Thoughts

Understanding how to get R&D tax credit is one thing—getting it right is another. By avoiding the mistakes above, you can increase your chances of securing valuable funding to reinvest in your business.

Done properly, R&D tax credits can transform your cash flow and fuel future innovation.

Next step: If you'd like a no-obligation review of your past or upcoming R&D claims, please get in touch. Many companies are surprised at how much more they could be claiming.

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