Why research and development tax credit claims get rejected and how you can avoid it happening

Claiming a research and development tax credit can provide valuable support for businesses investing in scientific and technical development. However, not every claim is accepted without question. Some are challenged, delayed or rejected because the explanation of the work, the supporting evidence or the cost treatment does not meet HMRC’s expectations. 

Understanding where claims commonly go wrong can help businesses avoid preventable mistakes. Where projects are clearly defined, technical uncertainty is properly evidenced and qualifying costs are accurately linked to the relevant work, the risk of challenge is significantly reduced. 

At Easy R&D, we believe preparation and clarity make a real difference. Understanding how HMRC assesses claims and applies the eligibility criteria can help businesses avoid common weaknesses and approach the process with greater confidence.

A research and development tax credit claim may be challenged or rejected for a small number of recurring reasons. In many cases, the underlying work may involve genuine technical development, but the claim does not clearly show how the activity meets the eligibility criteria. 

HMRC looks for evidence that a company attempted to achieve a scientific or technological advance and faced genuine technical uncertainty in doing so. If that uncertainty is not properly explained, a claim may appear weaker than the underlying work actually was. 

Some common issues arise repeatedly when claims are assessed. 

First, companies sometimes describe the commercial objective rather than the technical challenge. Improving a product, reducing cost or increasing performance can be business goals, but HMRC expects to see the technical barriers that had to be overcome in order to achieve that result. 

Another issue occurs when projects are defined too broadly. Research and development tax credit claims need to focus on the specific part of a project where uncertainty existed. When a claim attempts to cover the full lifecycle of development rather than the qualifying phase, the explanation can become diluted by routine activity. 

A further problem relates to documentation. Engineers, developers and technical teams often work through uncertainty by testing, iteration and analysis, but if that process is not recorded clearly, it becomes harder to demonstrate how the uncertainty was identified and addressed. 

Where these points are not explained and evidenced clearly, the claim may not meet the evidential standard HMRC expects. 

When HMRC reviews a research and development tax credit claim, the focus is on the technical detail rather than the commercial objective. 

A reviewer will typically want to understand four key points: 

• What scientific or technological advance the company attempted to achieve 
  
• What technical uncertainty existed at the start of the project 
  
• What work was undertaken to resolve that uncertainty 
  
• when the uncertainty was resolved, or when the attempt came to an end 

Where these points are not explained clearly, a claim becomes harder for HMRC to assess and more likely to attract further questions. 

For example, a software company may need to work out whether a new system architecture can handle significantly higher transaction volumes without causing instability or unacceptable latency. The qualifying work would involve the experimentation, testing and refinement needed to resolve that uncertainty. Once the solution becomes known or repeatable, the qualifying phase of the work may come to an end. 

Similarly, a manufacturing business may be trying to determine whether a new production method can maintain strength and consistency at scale, when existing methods produce unacceptable variation. In that case, the qualifying activity sits within the technical work undertaken to resolve that challenge, rather than the wider project as a whole. 

Many rejected or challenged claims share similar characteristics. These do not necessarily mean the company lacked qualifying activity. More often, the issue is that the claim does not clearly show how the work meets the eligibility criteria. 

One common mistake is describing the work in overly general terms. Statements about improving a system or developing a product are not enough on their own. HMRC expects a clear explanation of the specific scientific or technological obstacles that required investigation. 

Another mistake is including activities that do not qualify. Routine testing, quality assurance and standard implementation tasks will not usually fall within the definition of research and development. If these activities are included, the claim can appear less precise. 

Cost allocation can also cause problems. A research and development tax credit claim must link expenditure directly to the qualifying phase of the project. Costs relating to routine production or implementation should not be included. 

Finally, some claims are weakened because the timeline is unclear. Research and development begins when work starts to resolve scientific or technological uncertainty and ends when that uncertainty is resolved. If a claim does not identify that boundary clearly, it becomes harder for HMRC to see which activities and costs relate to qualifying work. 

Contemporaneous evidence can play an important role in supporting a research and development tax credit claim. This means records created at the time the development work was carried out, rather than explanations reconstructed after the event. 

In practice, this can include development logs, technical notes, testing records, engineering reports, design iterations and code version history. These records help show what the team was trying to achieve, where scientific or technological uncertainty arose and how the work progressed in response. 

This matters because HMRC is more likely to understand and accept a claim where the technical position is supported by evidence created during the project itself. Records produced at the time can help demonstrate what was known at the outset, what alternatives were considered and how the uncertainty was worked through in practice. 

Used properly, contemporaneous evidence also makes the claim easier to prepare. Rather than relying solely on retrospective summaries, businesses can draw on records created during development to support the technical explanation and link qualifying costs to the relevant activity. 

If your team is already capturing this type of information as work progresses, you may already have a strong foundation for evidencing a research and development tax credit claim. 

The UK’s research and development tax relief framework has undergone recent changes. 

For accounting periods beginning on or after 1 April 2024, the previous SME and RDEC schemes were replaced by a merged R&D scheme for most companies. A separate enhanced regime called Enhanced R&D Intensive Support applies to certain loss-making SMEs with high levels of R&D expenditure. 

The merged scheme was introduced to create a more consistent framework across businesses. It also changed some of the underlying rules. For example, the previous SME restriction for subsidised expenditure was not carried forward into the merged scheme, meaning grant funding does not affect relief in the same way it once did. 

Although the previous SME and RDEC regimes may still be relevant for older accounting periods, current claims will generally fall under the merged scheme or, where applicable, Enhanced R&D Intensive Support. 

These changes make it even more important for companies to ensure their research and development tax credit claims reflect the current rules rather than relying on older assumptions. 

To reduce the risk of challenge or rejection, an R&D claim should clearly answer a small number of core questions. 

These include: 

• Did the project seek to achieve a scientific or technological advance? 
  
• Did the work involve scientific or technological uncertainty that could not be resolved through readily available knowledge? 
  
• What limitations existed in the methods, tools or approaches already available? 
  
• What work was undertaken to resolve that uncertainty? 
  
• What was learned from the process, and when was the uncertainty resolved or the attempt brought to an end? 
  
• Can the associated costs be linked directly to that qualifying work? 

The clearer these points are, the easier it is for HMRC to understand how the claim fits within the scope of R&D tax relief.

Preparing a research and development tax credit claim can feel complex, particularly where businesses are unsure how HMRC will assess their work. Many companies carry out genuine technical development but find it difficult to show clearly where uncertainty existed, what work was undertaken to resolve it and how the associated costs should be treated. 

This is where specialist guidance can make a difference. 

At Easy R&D, we work closely with businesses to identify the qualifying elements of a project, clarify the technical basis of the claim and ensure that supporting costs are mapped accurately. This helps reduce the risk of avoidable weaknesses that can lead to challenge, delay or rejection. 

Our approach focuses on three steps. 

First, we establish eligibility by identifying the parts of the project where scientific or technological uncertainty existed. This helps ensure the claim is focused on the qualifying activity. 

Next, we carry out financial discovery. This stage links expenditure directly to the relevant development work so that costs are allocated accurately. 

Finally, we prepare and submit the claim with supporting documentation that explains the qualifying work clearly and in line with HMRC’s expectations. 

Since 2014, Easy R&D has supported thousands of UK companies in claiming the relief available to them. Our focus is on helping businesses present qualifying work clearly, reduce risk in the claims process and move forward with confidence. 

If you are unsure whether your work qualifies, the best place to start is with a structured assessment. 

Our team at Easy R&D offers a straightforward eligibility assessment designed to help businesses understand whether a research and development tax credit could apply to their projects, and whether the technical work and supporting costs are being considered in the right way. 

The process is practical and designed to give you a clearer view of how your development work fits within the UK’s R&D tax relief framework, while identifying any areas that may need closer attention before a claim is submitted. 

If you want to understand your position more clearly, completing an assessment is a simple way to explore whether your business could benefit from a research and development tax credit claim.