Your Easy R&D guide to best practice in record keeping for R&D Tax Relief claims

HMRC are checking more R&D tax relief claims than ever before. As part of their standard checks, HMRC will ask for the records used to compile a claim and will scrutinise those records to ensure the claim measures up to their standards.

Sub-standard record keeping increases the risk, time and complexity around a claim.

Best practice record keeping for R&D tax relief claims | Easy R&D

R&D Tax relief Claims

This summary guide gives you key pointers on best practice in record keeping related to R&D tax relief claims. Our expert tax consultant team are here to advise you on any aspect of record keeping. We will help you on past financial years’ records and can advise you on establishing new watertight procedures for record keeping for future claims.

Firstly, we want to underline three key principles we all need to follow when gathering evidence to substantiate a claim:

  • It is vitally important to ensure that the expenditure within a claim can be backed up by records. Records can be ranked on sliding scale of quality and value to HMRC. Contemporaneous supporting documents covering all the key details they require, are the most effective, followed by records created at the year-end or shortly after. Finally records created several years down the line, may be useful, but will be seen by HMRC as weaker and more open to question.
  • Documentary evidence is strongly preferred over witness testimony. Despite this we will not ignore a narrative back-story behind a claim. Notes on the chronicle of an R&D project can be helpful, but only if those notes are not the sole substan- tiation of R&D, they are recorded and stored in an accessible place and they can be made available, at request, to HMRC.
  • When it comes to matters of law, what matters is what can be proved. In an appeal to HMRC or via the Courts, after an adjustment of a claim by HMRC, non- compliant or deficient evidence will make any appeal likely to fail.

10 key takeaways

  1. There are significant financial and legal implications around record keeping for R&D tax relief claims
  2. Effective claims processes start with efficient record keeping, with granular contemporaneous records being the most valuable evidence of a claim
  3. Record keeping for a UK company is a legal requirement, with key records, including accounts, having to be kept for six years at a minimum
  4. HMRC can impose penalties related to poor record keeping or failure to provide evidence for a claim, with a sliding scale of fines starting with a £300 one-off pen- alty, up to fines reaching £1,000 every day a business is non-compliant
  5. In a review, HMRC will assess a company’s accounts but will focus more in- tensely on the R&D records that provide evidence of staff, sub-contractor and ‘consumables’
  6. Consumables are items that are ‘used up’ in R&D (utilities, hardware, software)
  7. Prototyping costs can form part of an R&D claim, but if a prototype is subsequently sold its costs will no longer be eligible in a claim (the costs and materials in the prototype will not have been ‘used up’)
  8. Verbal evidence of a claim is not the most useful evidence for a claim – formal notes progress and goals are best. More informal contemporaneous record keep- ing in the form of notes taken, and stored during a project, can be useful as support
  9. Appealing an HMRC decision to deny or reduce a claim will require the claimant company to provide robust evidence that HMRC’s adjustment is not valid. At this stage the burden of proof falls on the company, not HMRC
  10. Taking an appeal to Court/ Tribunal puts further onus on the appellant com- pany to provide evidence to back the claim, and the company must comply with all aspects of the Court’s instructions to have a chance of a favourable ruling

It’s getting easier to achieve best practice in record keeping

Our new customer portal, launching in the coming months, will simplify and standardise record keeping for all Easy R&D customers. This unique cloud-based automation tool supports contemporaneous and historic record keeping; simplifying and enhancing the process of making and, where needed, defending a claim.

In the light of the increased compliance checks by HMRC, record keeping is an increasingly critical topic for our customers. If you have any questions on record keeping, please do get in touch with Natalia Najzer, ATT, our Head of Business Support.

Natalia Nazjer

Natalia Nazjer, ATT
Operations Director

[email protected]

07747 459958

Download and share

A PDF version of this article is available here to share or read later.


Every customer and every claim we work with benefits from our deep expertise in how HMRC manages R&D tax credit applications. 

Contact Us

Get in touch with the Easy R&D expert who is right for you and your business.

Trust and Support

Cyber Essentials
Richard House Hospice