R&D tax relief after the crackdown: why now is a good time to review your position
The R&D tax relief market has experienced a turbulent few years.
For a period, large numbers of specialist R&D claims companies appeared, often approaching businesses with promises of substantial tax savings and charging contingency fees based on a percentage of the resulting benefit.
Some claims were prepared too aggressively or without sufficient technical evidence. HMRC responded by significantly increasing its scrutiny of R&D claims and introducing additional compliance requirements.
Unfortunately, legitimate businesses were sometimes caught in the middle. Some faced lengthy enquiries, while others discovered that the adviser responsible for preparing their claim was no longer trading when HMRC began asking questions.
The result was understandable caution. Many businesses that may have undertaken genuine qualifying R&D decided that making a claim was simply not worth the perceived risk.
The market has changed
HMRC has not stopped examining R&D claims, nor have the eligibility requirements disappeared. However, the market is now becoming more settled and better understood.
Many of the more speculative R&D claims companies have left the market, while the introduction of clearer reporting requirements has helped establish a more structured claims process.
HMRC figures show that the estimated number of R&D claims fell by 26% during the 2023–24 tax year. The decline was particularly pronounced among smaller businesses, with claims under the former SME scheme falling by 31%. This does not necessarily mean that smaller companies have stopped innovating. In many cases, businesses may simply have been discouraged from exploring whether they qualify.
For companies undertaking genuine technological or scientific development, R&D tax relief remains an important and valuable government incentive.
Could your business be undertaking R&D?
R&D is not limited to laboratories, scientists or businesses developing completely new inventions.
A project may potentially qualify where a company has attempted to achieve an advance in science or technology and has needed to overcome genuine scientific or technological uncertainty.
Examples can include:
Not every improvement will qualify. Routine changes, cosmetic improvements and ordinary commercial development are unlikely to meet the criteria. This is why a proper assessment is essential before a claim is prepared.
Why now is a good time to review your position
Businesses should not allow the problems created by poor-quality claims in previous years to prevent them from considering legitimate R&D activity.
The current environment rewards a measured and evidence-based approach. A claim should clearly explain the technological or scientific advance being sought, the uncertainties encountered, the work undertaken and the qualifying expenditure involved.
Reviewing projects early also makes it easier to retain appropriate records and obtain information from the people who were directly involved. Waiting until much later can make it considerably harder to reconstruct the technical work and associated costs.
There are also strict notification and submission requirements. For example, businesses making their first claim—or returning to R&D relief after a significant gap—may need to notify HMRC within a specified period. It is therefore sensible to review potential eligibility sooner rather than waiting until the company’s tax return is due.
Why the choice of adviser matters
An R&D claim forms part of a company’s wider tax position. It should not be treated as an isolated application prepared without proper consideration of the accounts, Corporation Tax return and supporting financial records.
Acconomy is an established firm of accountants with an experienced R&D specialist within the practice. We understand the figures behind a claim, the wider circumstances of the business and the evidence HMRC may expect to see.
Unlike advisers who charge a percentage of the tax benefit obtained, Acconomy charges according to the professional time required to complete the work.
Our process begins with an initial audit of the company’s activities and potential qualifying expenditure. We then provide a clear fee estimate before proceeding. This allows the business to understand both the potential opportunity and the likely professional costs before making a decision.
Where a claim proceeds, we work with the relevant people within the business to identify qualifying projects, calculate eligible expenditure and prepare the supporting technical information.
To date, Acconomy has maintained a 100% success record across the R&D applications and subsequent defences it has handled. Eligible clients may also benefit from our fee-protection arrangements should professional assistance be required during an HMRC enquiry, subject to the applicable policy terms.
A credible claim, not a speculative one
The purpose of an R&D review is not to manufacture a claim where one does not exist.
It is to ensure that businesses undertaking genuine innovation do not overlook relief to which they may legitimately be entitled.
If your company has developed a product, created or substantially improved software, changed a technical process or attempted to overcome a difficult technological problem, now may be an excellent time to review your position.
Contact Acconomy to arrange an initial R&D audit and find out whether your activities could qualify.
1. Comprehensive Analytical Review
2. Competitor Benchmarking
3. Company Valuation
4. Credit Rating
