R&D tax credit claims in 2026/27 require: (1) a written technical narrative explaining the R&D project, the technological uncertainty, and the systematic methodology; (2) documented evidence of competent personnel; (3) a defensible apportionment of staff time to R&D; (4) clear separation of R&D from non-R&D costs; (5) the claim filed with the CT600 corporation tax return. HMRC scrutiny has tightened significantly — enquiries are now opened on a much larger proportion of claims, with detailed questions on the technological uncertainty and personnel. The main rejection reasons: confusing commercial development with R&D, no contemporary documentation, vague "uncertainty" claims, and unrelated cost allocations.
The claims process — step by step
- Identify R&D projects. Map your work against HMRC's 4-part test: advance in science/technology, technological uncertainty, competent professionals, systematic investigation.
- Apportion costs. For each R&D project, calculate qualifying expenditure: staff (apportioned by time), subcontractors at 65%, consumables, software licences for R&D.
- Write the technical narrative. Per project: what was the technological uncertainty? What approaches did you try? Why did existing methods fail? How did you resolve it? Use the language a competent professional in the field would.
- Document evidence. Keep records of code repos, design docs, dev logs, technical discussions. HMRC may request these.
- Submit on CT600. Include the R&D claim in the CT600 Corporation Tax return + supporting CT600L / iXBRL schedules.
- Respond to HMRC enquiries. Within 30 days. Most enquiries can be resolved without escalation if documentation is good.
- Receive credit or cash refund. Typically 4-8 weeks for processing if no enquiry; 6-12 months if enquiry.
The technical narrative — what HMRC wants
The technical narrative is THE critical document. It typically covers, per R&D project:
- Project overview: what you were trying to build/achieve.
- The technological uncertainty: what wasn't known by experts in the field. Be specific. "We didn't know how to make X work" isn't enough; "Experts in the field of X have published Y approaches, all of which have limitation Z that our project specifically addresses by..."
- The systematic methodology: what approach did you take to resolve the uncertainty? Show iteration, hypothesis testing, experimentation.
- The personnel: who was involved, their qualifications, why they're competent in the field.
- The advance achieved: what new knowledge or capability did the project create?
Length: 2-5 pages per project for a typical SME. Some R&D advisers produce 20+ page narratives — quality matters more than length, but more documentation = more credibility.
The 10 biggest pitfalls
1. Confusing commercial development with R&D
"We built a new CRM" isn't R&D. "We had to develop a new natural-language understanding algorithm because existing solutions didn't handle our use case" might be R&D.
2. Vague "technical uncertainty"
"We weren't sure how to do it" doesn't cut it. You need to identify a specific technological challenge that a competent professional in the field wouldn't immediately know how to solve.
3. Claiming all staff time as R&D
HMRC expects realistic apportionment. A CEO writing the technical narrative isn't doing R&D for that time. A developer's time on bug fixes for non-R&D features isn't R&D.
4. Including non-R&D costs
Marketing, sales, customer support, general admin, capital expenditure — all excluded. Drawing a tight perimeter around what's R&D-specific is essential.
5. No contemporaneous documentation
"We did the R&D in 2024 and now we're writing the claim in 2026" without supporting documents from 2024 is weak. Keep dev logs, decision records, code repository history showing the R&D activity AS IT HAPPENED.
6. Subcontracted R&D treated incorrectly
Subcontracted R&D is allowable at 65% under the new scheme. But you must be doing the R&D direction; you can't outsource the R&D itself and still claim. Get the contract language right.
7. Wrong scheme classification
Confusion between SME scheme (largely abolished), RDEC (now the merged scheme), and R&D-intensive SME (preserved at higher rates). Apply the correct scheme rate.
8. Wrong staff cost allocation
Salaries are claimable; bonuses generally yes if paid in the period; share-based awards typically NO; pension contributions yes; private healthcare typically NO. Get the allowable list right.
9. Ignoring the £20k de minimis
For companies with R&D expenditure below £20k, the claim is generally not worth the compliance cost. Some advisers will still claim; ensure the math works.
10. Missing the time limit
R&D claims must be submitted within 2 years of the end of the accounting period. Late claims are rejected outright.
HMRC's tightened scrutiny — what to expect
From 2022-2025, HMRC dramatically increased R&D enquiries:
- Roughly 20%+ of claims now receive enquiries (up from ~5%).
- Enquiry questions focus on: technological uncertainty (vague claims rejected), personnel competence (junior staff's claims questioned), staff time apportionment (high % allocations challenged).
- HMRC has hired specialist R&D inspectors who understand technology.
- "Bad actor" R&D advisers (charging contingency fees on fabricated claims) have been actively prosecuted.
Implication: be conservative. Don't inflate. Document thoroughly. Use reputable advisers.
R&D claim software vs specialist adviser
| Software (e.g. RD Tech, Counting Up) | Specialist adviser | |
|---|---|---|
| Cost | £200-£800 | £2,000-£10,000 fixed or 20-30% contingent |
| Best for | Straightforward claims, R&D-intensive software companies with clear R&D | Complex claims, first-time claimants, high-value claims |
| HMRC enquiry support | Limited — usually pay extra | Included or per-hour |
| Risk allocation | You bear it | Adviser bears some risk on contingency |
Sources and methodology
HMRC R&D guidance from Corporate Intangibles Research and Development Manual (CIRD80100+). Recent enforcement data from HMRC and HM Treasury annual reports. For specific R&D claim advice, engage an R&D-specialist accountant. The methodology page documents sources.
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