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R&D Tax Credit Claims: 7 Reasons HMRC Could Reject Your Claim



Many UK businesses invest heavily in developing new products, improving technology, or creating better ways of working. For companies carrying out genuine innovation, an R&D tax credit claim can provide valuable financial support by helping recover part of the cost of development. However, not every claim is successful.

HMRC has increased its focus on the quality of R&D claims, and businesses are expected to provide clear evidence that their projects meet the required conditions. A claim can be rejected even where real development work has taken place if the technical details, costs, or supporting information are not properly explained.

Here are some of the most common reasons why R&D Tax Credit claims face problems with HMRC.

1. No Real Technological Advancement Is Shown by the Project

One of the biggest misunderstandings around the R&D tax credit is that any new idea automatically qualifies. It does not. HMRC is looking for projects that attempt to achieve an advance in science or technology.

A project may qualify where a business is trying to overcome a genuine technical challenge that cannot be easily solved using existing knowledge or standard solutions.

However, simply purchasing existing software, updating a website, or making routine improvements may not meet the requirements.

A strong claim should clearly explain:

  • What technology existed before the project started

  • What technical improvement was being attempted

  • What challenges needed to be solved

  • Why the solution was not obvious to a competent professional

2. The Technical Challenges Are Not Clearly Explained

A common reason for HMRC questioning claims is that the explanation focuses on the business idea rather than the technical work.

HMRC is not interested in whether a project was expensive, commercially risky, or important to the company.

The key question is:

Was there a genuine technological uncertainty that needed to be overcome?

For example, developing a new application that requires solving performance, security, or integration problems may involve qualifying R&D.

The claim should explain the technical problem, the options considered, the testing undertaken, and how the business worked towards a solution.

3. The Wrong Costs Are Included

Even if a project qualifies, not all business expenses can be included in an R&D tax credit claim.

Common qualifying costs may include:

  • Employee costs directly involved in R&D activities

  • Certain software costs

  • Cloud computing costs

  • Eligible subcontractor costs

  • Materials and consumables used during development

A common mistake is including costs that do not relate directly to the R&D activity.

For example, if an employee spends only part of their time working on qualifying R&D, only the relevant proportion of their cost should normally be considered.

Claims should always be supported by reliable records, including payroll information, invoices, and accounting records.

4. Subcontractor Costs Are Not Treated Correctly

Many businesses rely on external specialists, developers, or engineers during R&D projects.

However, subcontractor costs have specific rules, and incorrect treatment can create issues during an HMRC review.

Businesses should consider:

  • Who carried out the R&D work

  • Who decided the project was required

  • The nature of the contractor relationship

  • Whether specific restrictions apply

Proper contracts and documentation can help demonstrate why subcontractor costs have been included.

5. The Required HMRC Information Is Missing

A strong technical project can still face problems if the correct information is not submitted.

Companies making an R&D tax credit claim must provide detailed information about their projects, including:

  • The nature of the R&D activity

  • The technical uncertainties involved

  • The work undertaken

  • The qualifying costs included

HMRC uses this information to assess whether the claim meets the requirements. Incomplete or unclear information can lead to delays or further questions.

6. The Claim Does Not Match the Company’s Records

HMRC may compare an R&D tax credit claim against other company information.

This can include:

If the figures claimed cannot be supported or do not match the company’s records, HMRC may challenge the claim. Good record-keeping is one of the most important parts of preparing a successful claim.

7. The Claim Does Not Explain the R&D Journey

Many unsuccessful claims focus only on the final result. However, HMRC wants to understand the journey behind the development.

A strong claim should explain:

The challenge → The uncertainty → The development process → The testing → The outcome

The focus should be on the technical work carried out, not just the commercial success of the project.

How Businesses Can Improve Their R&D Tax Credit Claims

Before submitting a claim, businesses should ask:

  • Does the project involve a genuine technological challenge?

  • Have we explained why the solution was not straightforward?

  • Do we have evidence to support the costs?

  • Can we clearly describe the development process?

Taking time to prepare the claim properly can significantly reduce the risk of HMRC enquiries or rejection.

Need Help With Your R&D Tax Credit Claim?

Preparing a successful R&D tax credit claim requires more than identifying a project that involves innovation. The technical work, qualifying costs, and supporting evidence all need to be presented clearly to meet HMRC’s requirements.

At Artifin Accountants, we help businesses assess their R&D eligibility, review qualifying expenditure, and prepare claims with the supporting information HMRC expects.

Read our detailed guide on why R&D Tax Credit claims get rejected by HMRC and how businesses can avoid common mistakes:

Visit our blog: https://artifinaccountants.co.uk/why-rd-tax-credit-claims-get-rejected-by-hmrc/

If you are unsure whether your project qualifies for R&D relief, professional advice can help you understand your options before submitting a claim.

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