5 Common R&D Tax Credit Mistakes That Trigger HMRC Enquiries

HMRC is now checking one in five R&D claims. The error rate they've found is 16.7% across the board, and a quarter of examined claims are fully disallowed. These aren't complicated frauds — most are genuine mistakes by honest businesses.

Here are the five most common errors we see, and how to avoid them.

1. Claiming Routine Work as R&D

This is the number one reason claims get rejected. Companies confuse "technically difficult" with "R&D". Building a complex website is technically difficult. Configuring a bespoke ERP system is technically difficult. But neither qualifies as R&D unless there's a genuine scientific or technological uncertainty that a competent professional in the field couldn't readily resolve.

The test under CTA 2009 s1042 and the BIS Guidelines is clear: the work must seek an advance in overall knowledge or capability in a field of science or technology. "New to us" doesn't count — it has to be new to the field.

Translation: If someone, somewhere has already solved this problem and the solution is publicly available, it's not R&D. Even if your team didn't know about it.

2. Overclaiming Staff Costs

Staff costs are typically the largest element of an R&D claim, and they're where HMRC finds the most errors. The common mistakes are claiming 100% of a staff member's time when they split their work between R&D and non-R&D activities, including management time that isn't directly related to the R&D, and failing to apportion costs for employees who work across multiple projects.

HMRC expects to see a reasonable basis for the time allocation — whether that's timesheets, project management records, or a defensible estimation methodology. "We estimated that 80% of the development team's time was R&D" with no supporting evidence will not survive an enquiry.

3. Weak Technical Narratives

Your technical report is the single most important document in your claim. HMRC's R&D specialists read hundreds of these. They can immediately spot a template-based report that uses generic language without explaining the specific technological uncertainty.

A strong narrative addresses four questions for each project:

1. What was the scientific or technological uncertainty?
2. What knowledge existed at the outset?
3. What work was undertaken to resolve it?
4. What was the outcome?

If your report reads like it could describe any company in your sector — with the company name swapped out — it's too generic.

4. Including Non-Qualifying Costs

Not all project costs qualify for R&D relief. Common errors include claiming for production costs (manufacturing the product, not developing it), claiming customer-specific customisation as R&D, including costs of obtaining regulatory approval or certification (which is generally not R&D itself), and claiming capital expenditure that should be handled through capital allowances instead.

Since the merged scheme introduced restrictions on overseas subcontractor and EPW costs (for accounting periods beginning on or after 1 April 2024), this is an increasingly common error area.

5. Missing the Notification Deadline

Since April 2023, companies making R&D claims for the first time (or not having claimed in the previous three accounting periods) must submit a Claim Notification Form to HMRC within 6 months of the end of the accounting period. Miss this deadline and you cannot make a claim at all — regardless of how strong your R&D case is.

This deadline catches out a surprising number of businesses, particularly those who discover R&D tax credits partway through a year and assume they can backdate.

How to Protect Yourself

The pattern across all five mistakes is the same: inadequate preparation and documentation. Companies that document their R&D activities as they go, maintain clear cost records, and work with specialists who understand HMRC's expectations are far less likely to face enquiry issues.

If you're already making claims and wondering whether they'd withstand scrutiny, a claim health check now is significantly cheaper than defending an enquiry later.

Innovation Plus prepares HMRC-compliant R&D tax credit claims and provides enquiry defence services. Contact us for a free claim review.