Common Mistakes Businesses Make When Claiming R&D Tax Relief

R&D tax relief is one of the most generous incentives the UK and Irish governments offer to businesses that invest in innovation. Yet despite the potential to recover thousands — sometimes tens of thousands — of pounds or euros each year, a significant number of businesses either miss out on it entirely or make claims that are weaker than they should be.

Some of those mistakes are honest ones. R&D tax relief is a complex area, and the rules have changed considerably in recent years. Others come from working with advisers who lack the specialist knowledge to do the job properly, or from business owners trying to navigate the process themselves without fully understanding what’s required.

This article sets out the most common pitfalls — so you can avoid them, or at least know what to look out for when reviewing your own position.

Mistake 1: Assuming you don’t qualify

This is probably the single most costly mistake, because it means businesses never even start the conversation.

There’s a widespread belief that R&D tax credits are only for technology companies or pharmaceutical firms with dedicated research departments. In practice, HMRC and Revenue Ireland define qualifying activity much more broadly than that. Manufacturing businesses developing new production methods, food companies reformulating products, software developers building bespoke platforms, construction firms solving novel engineering challenges — all of these can qualify.

The core test is whether your project involved genuine scientific or technological uncertainty — a problem where the answer wasn’t already known and couldn’t simply be looked up. If your team spent time figuring out how to make something work, and it wasn’t obvious from the outset, that’s a strong starting indicator.

If you haven’t explored this yet, our earlier article on what qualifies for R&D tax credits in the UK and Ireland walks through the qualifying criteria in detail and covers a wide range of sectors and activity types. It’s well worth a read before writing off your chances.

Mistake 2: Poor record-keeping throughout the year

This is where a huge number of claims fall short — not because the activity doesn’t qualify, but because the evidence to support it isn’t there.

HMRC has significantly increased its scrutiny of R&D claims over the past few years, following a period in which abusive and poorly documented claims were submitted by some businesses and certain unscrupulous advisers. Claims are now reviewed far more rigorously, and the burden of demonstrating that your activity genuinely qualifies falls squarely on you.

That means keeping contemporaneous records — notes, project logs, timesheets, technical reports, email trails — that show what your team was working on, what the specific uncertainty was, and how you went about trying to resolve it. Trying to reconstruct this evidence months later, at the point when the claim is being prepared, is a recipe for a weak claim and a potential HMRC enquiry.

The best approach is to build R&D record-keeping into your normal project management processes throughout the year. Our digital bookkeeping service helps businesses keep their financial records in the kind of structured, accessible format that makes this kind of evidence-gathering far more straightforward — which matters enormously when claim time comes around.

Mistake 3: Claiming the wrong costs — or missing eligible ones

Identifying which costs can be included in an R&D claim is more nuanced than it might appear, and mistakes happen in both directions: businesses either include costs that don’t qualify, or miss significant eligible expenditure that would have strengthened their claim.

In the UK, eligible costs under the merged scheme (which applies to most businesses for accounting periods beginning on or after 1 April 2024) include staff costs, employer’s National Insurance and pension contributions, software used in the R&D process, consumable materials, and payments to subcontractors — though subcontractor costs are subject to specific restrictions. Overheads such as rent and general business expenses do not qualify directly.

A common error is including all of a qualifying employee’s salary when only a portion of their time was spent on R&D activity. Equally, some businesses miss the fact that managers and senior staff who oversee R&D projects can have a proportion of their time included, or that the costs of externally provided workers are also potentially claimable.

On the Irish side, the 30% credit applies to a similarly defined range of costs, with its own specific rules around subcontractors and group companies that need careful handling.

Getting this right requires someone who understands the detail — which brings us to the next mistake.

Mistake 4: Using non-specialist advisers

R&D tax relief has become a crowded market. There are many firms — some legitimate, some less so — offering to prepare R&D claims, often on a contingency fee basis where they take a percentage of what’s recovered. The problem is that not all of them have the technical depth to prepare claims that are genuinely robust.

HMRC is now far more likely to open an enquiry into claims that look too good to be true, are poorly evidenced, or rely on an overly generous interpretation of the qualifying criteria. If your claim is challenged and doesn’t hold up, you could face repayment of the credit along with interest and penalties.

The right adviser is one who has deep knowledge of both the tax legislation and the technical subject matter — someone who can engage credibly with your engineering, software, or manufacturing team to properly understand and articulate the qualifying activity, not just the finance team. Dual-qualified specialists who understand both UK and Irish tax regimes are particularly valuable if you operate across both jurisdictions.

As accountants in Armagh and across Northern Ireland with a team of dual-trained chartered tax advisors, SCC’s specialist tax team works closely with clients to build claims that are technically sound, well-evidenced, and designed to withstand scrutiny.

Mistake 5: Missing the deadlines

In the UK, an R&D claim is made by amending your company’s Corporation Tax return. You generally have two years from the end of the accounting period to do this — which means if you haven’t claimed for a prior year, you may still be able to go back and recover what you’re owed, but only within that window.

In Ireland, claims must typically be made within 12 months of the filing deadline for the relevant accounting period. Miss that window and the entitlement is gone.

A lot of businesses don’t realise they can go back and amend prior year returns, which means they leave prior year claims on the table without knowing it. If your business has been carrying out qualifying R&D activity for several years without making claims, it’s worth speaking to a specialist urgently to understand whether retrospective claims are still possible. Read more about how tax accountants help small businesses make the most of the reliefs available to them throughout the year.

Mistake 6: Failing to understand the post-2024 UK scheme changes

The UK R&D landscape changed significantly for accounting periods beginning on or after 1 April 2024, when HMRC merged the previous SME scheme and the Research and Development Expenditure Credit (RDEC) into a single unified regime for most businesses.

The merged scheme has a different rate structure and different rules around subcontractor costs compared to the old SME scheme — and some businesses are still operating on assumptions that were valid under the old rules but no longer hold. There is also a separate enhanced rate for R&D-intensive SMEs (broadly, those where qualifying R&D expenditure represents at least 30% of total expenditure), which some eligible businesses are missing.

If your last R&D claim was made under the old SME scheme and you haven’t reviewed your position under the merged regime, now is the time to do that. The approach your adviser took previously may need updating. Our specialist tax team stays current with all changes to both the UK and Irish schemes, ensuring our clients’ claims reflect the current rules rather than the old ones.

Mistake 7: Not considering the cross-border dimension

For businesses operating across both the UK and Ireland — which is common for many Northern Ireland-based companies — there’s an additional layer of complexity that’s easy to overlook.

It may be possible to make R&D claims in both jurisdictions, depending on where the qualifying activity takes place and where costs are incurred. But this requires careful planning to avoid double-counting costs, and to ensure that the interaction between the two schemes is handled correctly. The rules around subcontracted R&D in particular differ between the UK and Ireland, and getting this wrong can create compliance problems in both territories.

Good cross-border tax advisors who are genuinely qualified in both UK and Irish tax are essential here. This is also relevant in the context of VAT — our article on VAT compliance for businesses operating across the UK–Ireland border illustrates how the complexities of cross-border operations span multiple tax heads simultaneously, not just R&D. And if you’re thinking about expanding further afield, our piece on tax planning for UK businesses expanding overseas is a useful companion read.

Mistake 8: Treating R&D claims in isolation from wider tax planning

R&D tax relief works best when it’s part of a broader, joined-up tax strategy rather than a standalone exercise carried out once a year. The Patent Box regime in the UK, for example, allows businesses to pay a reduced rate of corporation tax on profits arising from patented inventions — which frequently stem from the same innovation activity that generates R&D claims. Failing to consider Patent Box alongside your R&D position means leaving additional value on the table.

Similarly, capital allowances on plant, machinery, or specialist equipment purchased for R&D purposes, and the Knowledge Development Box in Ireland, are all potential sources of additional relief that should be reviewed alongside your R&D claim.

This joined-up approach is also relevant to your ESG strategy. If your R&D is focused on developing cleaner technologies or more sustainable processes, there may be grant funding opportunities — from Innovate UK and other bodies — that complement your tax relief position. Our sustainability and ESG advisory team can help you think about how these strands fit together.

As our article on the future of financial planning explores, the businesses that get the most from their professional relationships are the ones that treat their advisers as genuine strategic partners rather than year-end compliance providers.

Mistake 9: Overlooking the risk of an HMRC enquiry

It’s tempting to assume that once a claim has been processed and the credit received, the matter is closed. In reality, HMRC can open an enquiry into an R&D claim at any point within the applicable time limits — which means a claim that was accepted without comment could still be challenged later.

If HMRC does open an enquiry, you need clear documentation and a technically sound narrative to defend your position. Businesses that relied on poor-quality advisers for the original claim often find themselves in difficulty at this point, particularly if the claim was aggressive or the records are thin.

In more serious cases — where the integrity of the financial records is in question or there’s a dispute over figures — forensic accountants Northern Ireland businesses and advisers trust can provide specialist investigative support and expert witness evidence if matters escalate. If the situation is putting significant financial pressure on the business, our recovery accounts UK team can also help you understand your options and stabilise your position.

Don’t let a common mistake cost you

R&D tax relief is real money — money that belongs in your business, not left unclaimed because of a gap in knowledge or a poorly prepared claim. The mistakes in this article are all avoidable with the right support in place.

At SCC Chartered Accountants, our specialist tax team combines deep knowledge of both UK and Irish R&D tax legislation with genuine technical understanding across multiple sectors. We take the time to understand your business, identify all qualifying activity, build a robust evidential base, and prepare claims that are designed to withstand scrutiny — not just pass through unchecked.

Get in touch today to find out whether your business is getting everything it’s entitled to from R&D tax relief.