5 Typical Errors HMRC Catches in R&D Tax Credit Claims

by | Nov 25, 2025 | R & D Tax Credits | 0 comments

5 Typical Errors HMRC Catches in R&D Tax Credit Claims

HMRC regularly highlights a set of recurring errors that companies make when submitting R&D Tax Credit claims. These mistakes often lead to claims being reduced, delayed, or challenged.

Errors HMRC Catches in R&D Tax Credits Claims

Here is what HMRC states are the main errors made by companies:

1. Projects do not meet the Definition of R&D

Many claims fail because the company has not demonstrated that:

  • A Scientific or Technological Uncertainty existed.
  • A competent professional would not be able to resolve the issue easily.
  • The work sought an advance in Science or Technology, not just a product or process improvement for commercial reasons.

HMRC finds that many businesses incorrectly assume any innovation qualifies, which is not the case.

2. Insufficient Evidence or Technical Justification

HMRC frequently cites claims where:

  • The technical narrative is vague or overly commercial.
  • There is no clear explanation of why the outcome was not known or easily deducible.
  • The claimant does not describe the baseline knowledge, uncertainty, work done, and outcomes.

Often, the narrative does not link to specific qualifying activities.

3. Claiming Routine Work or Commercial Activities

Common non-qualifying activities that HMRC sees included in claims:

  • Routine engineering or software development.
  • Cosmetic or styling changes.
  • Data entry, troubleshooting, or testing without an underlying uncertainty.
  • Market research, feasibility studies, or business analysis.
  • Purely commercial innovation.

HMRC stresses that only work addressing technological uncertainty qualifies.

4. Over-claiming Staff Time

HMRC notes frequent errors, such as:

  • Inflated percentages of staff involved in R&D.
  • No time-tracking or reasonable allocation method.
  • Including staff who provide non-qualifying support functions (HR, finance, admin).

5. Incorrect Subcontractor or Externally Provided Worker (EPW) Treatment

Common mistakes include:

  • Treating subcontractors as EPWs or vice-versa.
  • Claiming subcontractor costs not linked to qualifying R&D.
  • Incorrectly claiming 100% of arm’s length subcontractor costs
  • Claiming subcontractors where the company is in fact purchasing a service or goods and does not engage contractors to carry out R&D on the company’s behalf.

Other Areas of Error HMRC Reports are:

  • Including Ineligible Costs.
  • Poor Record-Keeping.
  • Not completing the Additional Information Form (AIF) correctly.
  • Not filing the Notification for first-time filers, and those who have not filed in the past 3 years, on time.

If you have any questions on R&D Tax Credits or want to find out more about the typical errors HMRC catches in R&D claims, please do not hesitate to contact Jenni at [email protected].