Top 6 reasons HMRC rejects R&D claims (and how to avoid them)

“What if HMRC claws back every penny?”

That’s the nightmare scenario I hear from almost every director and business owner. For a few years now, HMRC has increased its compliance checks on R&D tax claims.

HMRC’s 2023 “one-to-many” letter campaign used hard-edged language that hinted at potential fraud and officers frequently followed up with boiler-plate questions that ignored the evidence companies had already supplied.

This combination of an accusatory tone and patchy case-handling left many legitimate businesses on the back foot: HMRC’s own compliance report shows that 77% of the 9,700 claims taken into enquiry in 2023-24 were adjusted or rejected - 7,469 companies whose relief was cut back or denied.

Since 2008, I’ve sat across the table from HMRC, defended claims and watched other firms lose six-figure tax savings simply because small details were missed, misunderstood or mis-explained, not just in R&D tax but other taxes too.

My goal in this article is simple: give you a clear, experience-based roadmap to keep your R&D tax relief safe, whether you file in-house or partner with an advisor.

By the end, you’ll:

Know the six specific rejection triggers HMRC flags.
See how those triggers show up in the real world (with jargon-free examples).
Get practical steps to fix or prevent each issue.

If you’re a UK‐based CFO, financial controller or founder wondering whether your next R&D claim will survive HMRC’s stricter regime, this guide is for you.

Why does HMRC reject R&D tax relief claims? (Quick overview for worried finance teams)

HMRC rejects R&D tax claims when it can’t trust the technical narrative, the maths or the people behind it (the claimant or the R&D advisor).

In 2023/24 alone, the department rejected or clawed back roughly £441 million of R&D relief because claims were non-compliant or over-inflated. The £441mn includes claimants that may have had legitimate claims but were unable to defend them due to HMRCs approach to compliance checks.

In my opinion, six patterns account for nearly every refusal:

The project isn’t bona-fide R&D under the statutory definition.
The supporting evidence is weak, missing or filled with fluff.
The R&D Advisory firm is high risk.
Staff apportionment is wildly optimistic.
No “competent professionals” are shown to be driving the R&D.
The claim misses a deadline.

I’ll tackle each one in turn and crucially show you how to sidestep them.

Does my project really qualify as “R&D” under HMRC rules?

The single biggest misconception is that “R&D” equals anything innovative. HMRC’s CIRD 81900 definition is far narrower:

Advance In Science Or Technology - You must seek an overall advance in knowledge or capability.
Technological or Scientific Uncertainty - To achieve the advance above, you don’t know whether it's technologically feasible, scientifically possible or how to achieve it in practice and isn't readily deducible by a competent professional.

Quick Self-Test

Can you name the key scientific or technological uncertainties and advances?
Could another skilled competent professional have solved them easily?

If you score “no” on any bullet, it probably doesn't qualify for R&D tax relief.

What evidence and technical narrative does HMRC expect to see with an R&D claim?

A robust claim boils down to clarity, specificity and simple English. A good report should be easily understandable by a layman.

HMRC reviewers skim hundreds of reports; if yours reads like marketing fluff, it will be flagged.

Three Writing Sins That Trigger Suspicion

Vague Superlatives: avoid words such as bespoke, custom, unique, revolutionary, world-first and cutting-edge. Unfortunately, less qualified R&D consultants use filler words in their reports without detailing why the projects qualify for R&D. This has resulted in these words being unofficially flagged by HMRC.
Unsubstantiated Assertions: “We achieved a 50% performance uplift”. That’s great. Now you should show the benchmark data and how the improvement was achieved. If you can’t defend the statement, exclude it from your R&D claim.
Story Gaps: Jumps from problem to “we fixed it” without a breakdown of failed iterations, code refactors or dead ends.

Instead, structure every narrative around each technological advance as follows:

Baseline: Explain the industry standard of the technology/science.
Advance: Explanation of the advance you sought. I recommend you try to substantiate the advance. For example, the baseline in technology was 1 second to retrieve results, the advance reduces this to 0.48 seconds, an improvement of 52% over the baseline.
Uncertainty:
- What was preventing the advance?
- What did you do to overcome the uncertainty? Include details of what experiments, prototypes or simulations you ran.
- Did you solve the uncertainty?
Evidence: Commit numbers, test results, git logs, photos of prototypes. This is a bonus, that can really cement the strength of the claim.

High-Risk Advisors

As a result of the increased scrutiny of R&D claims, it’s no longer just what you say in the claim that matters. It now matters who files it.

Since the R&D reforms in 2023, HMRC is trying to identify the pool of advisors who are fraudulent or lack expertise to prepare R&D tax claims. There has been some firms that have been identified by HMRC (not officially) and as a result of this a lot of their client base now have HMRC Enquiries.

How To Protect Your Claim (And Reputation)

Run due-diligence before engagement
Check Companies House for County Court Judgments (CCJs) or overdue accounts.
Search the internet for warning notices.
Ask for the working papers
Ask for a reconciliation spreadsheet linking every figure back to payroll, ledgers and invoices.
Make sure you (or your finance lead) can walk HMRC through the R&D report without the advisor present.
Get their competent professional to sign off, not the salesperson
The R&D consultant should be willing to sign off the R&D claim to create an audit trail.
The R&D agent should submit the Additional Information Form (AIF) using their agent services account. If they want you to submit it, then that is a huge red flag.
Request PI insurance details in the engagement letter
Verify cover limits exceed your expected claim size.
Request Qualifications
Ask for certificates for tax/accounting memberships

We’ve recently seen qualified accountants and tax professionals acting fraudulently. Their qualifications should be looked at along with the other factors.

HMRC now scores people as well as projects. An otherwise solid claim can be dragged into a year-long enquiry simply because the wrong firm helped you prepare your R&D claim. Choose an adviser you’d be happy to invite into an enquiry meeting and make sure you can still defend every line without them.

High Staff Costs

HMRC know that even the most focused engineers answer emails, attend training or do production support.

When 90% - 100 % of an employee’s annual hours are included in the claim, HMRC’s first thought is that it's “inflated.”

Please note, just because it’s a greater risk of claiming high staff time, there are experts who work solely on R&D so they may work 95% of their time in qualifying R&D. The important point is that you must be able to justify it to HMRC.

Some R&D advisory firms have internal control processes that limit the amount of time they report for employees. I have seen firms cap time at 90% - 95%.

How To Defend Higher Percentages

Timesheets or time-tracking apps (Harvest, Tempo, Clockify) showing daily breakdowns.
Sprint capacity planning documents linking hours to tickets (e.g. Jira)
Signed Manager Attestations explaining rare cases (e.g. ring-fenced “skunk works” teams with no BAU duties).

No Competent Professionals Working On The Project

HMRC’s guidance is clear: a “competent professional” (CP) is someone who, at the project’s start, had relevant qualifications and practical experience in the field.

Their role is to identify the uncertainty and lead the investigation to attempt to overcome the uncertainty.

Common Pitfalls

Junior developers or graduate scientists are listed as sole contributors.
No CVs, bios or LinkedIn profiles included with the R&D claim.
CP signs the R&D tax report but was not involved with the information gathering process.

How To Prove Competence

Include short bios for each CP highlighting years’ experience, degrees, and notable projects.
Reference professional body memberships (ICE, IET, BCS, IChemE)
The competent professional should be at the R&D technical meeting (or oversee the information exchanged), they must read the R&D report and sign it off. Should HMRC open an Enquiry into the claim, the CP should be able to directly liaise with HMRC about their projects.

What deadlines can cause an automatic R&D claim rejection?

The reforms of R&D tax relief were introduced to:

Reduce error
Identify deliberate fraudsters (claimants and disingenuous R&D tax firms)
Improve HMRC reporting
Help HMRC manage the compliance process quicker

Key Timing Rules

Two-year window – You have 24 months from the end of the accounting period to amend the CT600 to include the R&D numbers. This is well known now as R&D has been around for many years and it aligns with the company return amendment dates.
Additional Information Form (AIF) – Must be before or on the same day the CT600 including the R&D cost is filed.
We’ve spoken with claimants that have not completed the AIF and their R&D claim has been rejected.
R&D Claim Notification – If you’ve never claimed R&D in the past or your last claim was made more than 3 years before the last date of the ‘claim notification period’, you must notify within six months of the period end.
This is the most common mistake we see when it comes to missing deadlines.

I recently had a conversation with a tech business owner that had spent approximately £1mn on R&D and their accountant thought they could submit the claim within 2 years. They now can’t claim a penny for those costs as the deadline to notify HMRC has passed.

Conclusion – Ready to protect your R&D tax relief?

You now have a practical checklist covering the seven traps that cost UK companies millions each year:

Confirm true R&D status.
Write evidence-rich, jargon-free narratives.
Avoid risky R&D tax firms.
Keep staff apportionment provable.
Spotlight competent professionals.
File through the right portal, on time.

Follow these steps and you’ll stand out as a low-risk, high-credibility claimant.