The R&D tax claim a cold caller talked us into

The pitch is well-rehearsed and it has been made to almost every limited company in the country. You have probably been doing qualifying research and development without realising it. There is money sitting there. We work on a success fee, so there is no risk to you.

The last sentence is the one to think about hardest, because it is not true in the way it sounds. The fee is contingent. The liability is not. If HMRC opens an enquiry two years later and disallows the claim, the company repays the money with interest and possibly a penalty, and the company is the one that signed the tax return. The adviser's fee has already been paid, and a meaningful number of the firms that made the calls no longer exist.

None of which means R&D relief is a scam. It is a legitimate and generous incentive that genuine innovators should be claiming. It means the gap between what the incentive covers and what the cold call implies it covers is where the damage happens.

What the relief actually is now

The old split between the SME scheme and RDEC has gone for accounting periods starting on or after 1 April 2024. The default is now the merged scheme: a 20% above-the-line expenditure credit on qualifying costs. The credit is itself taxable, so a company paying corporation tax at 25% keeps about 15p of every qualifying pound.

There is a second route for the genuinely research-heavy. Enhanced R&D Intensive Support, or ERIS, is available to loss-making SMEs whose qualifying R&D spend is at least 30% of their total expenditure — a threshold reduced from 40% for expenditure from 1 April 2024. ERIS gives an additional 86% deduction, taking the total to 186%, and a payable credit of up to 14.5% on surrenderable losses, which works out at roughly 27p per qualifying pound. That is a substantial cash sum for a pre-revenue business burning money on development, and it is the reason the incentive exists.

On the merged scheme, £80,000 of qualifying spend produces a £16,000 credit, taxed at 25%, leaving about £12,000. A contingent fee of 25% takes £3,000 of that. Those are illustrative figures, but the shape is typical, and it is worth seeing written down before agreeing to a percentage.

The definition, which is narrower than the phone call suggests

Qualifying R&D means seeking an advance in science or technology by resolving scientific or technological uncertainty that a competent professional working in the field could not readily resolve. Every part of that sentence is load-bearing.

An advance in the field, not an advance for your company. Solving a problem that your competitors solved years ago is new to you and is not an advance. Technological uncertainty, not commercial or design uncertainty — not knowing whether customers will buy it is not uncertainty in this sense. And a competent professional could not readily resolve it, which excludes anything an experienced developer would work out in an afternoon with the documentation open.

Building a website is not R&D. Building something that a competent professional in the field genuinely did not know how to build might be.

The activities that qualify are also narrower than the projects they sit inside. Within a genuine R&D project, the qualifying period runs from the point the uncertainty is identified to the point it is resolved. Routine build-out, testing of a known solution, marketing and admin fall outside it even when they are part of the same job.

The compliance the claim now has to survive

Three procedural requirements have real teeth, and missing any of them can end a claim regardless of how good the underlying science was.

Claim notification. A company claiming for the first time, or which has not claimed in the previous three years, must notify HMRC in advance using the claim notification form, submitted within six months of the end of the accounting period the R&D took place in. Miss that window and the claim is invalid, full stop. This catches companies whose adviser turns up eight months after the year end with a proposal.

The additional information form. Since August 2023 every claim requires an AIF submitted through HMRC's portal on or before the day the corporation tax return is filed. It sets out the projects, the uncertainties, the costs and — significantly — the details of any agent involved in preparing the claim.

A named senior officer. A director or senior executive of the company must be named as taking personal responsibility for the accuracy of the claim. That name is not a formality. It is HMRC making explicit whose claim it is, and it is the answer to the question of who carries the risk.

How to tell a good adviser from a bad one

A good adviser asks to speak to the person who did the technical work, not just the finance director. They will tell you when a project does not qualify, and a firm that has never turned a prospect away is not applying the test. They charge in a way you can understand — a fixed fee, or a contingent fee at a rate that reflects the work rather than a share of a windfall. They put their name on the additional information form. And they agree in writing to defend the claim through an enquiry at no extra cost, which is the clause that tells you whether they believe their own analysis.

The warning signs are the mirror image. Unsolicited contact. Confident numbers before anyone has looked at what you actually do. Reassurance that everyone in your sector claims. Reluctance to name the senior officer or explain what that means. Contingent fees at 30% or more. And any suggestion that the paperwork can be handled without involving your accountant, who is the person who has to file the return the claim sits inside.

What to do if you think you might genuinely qualify

Start with the technical question rather than the tax one. Write down, in a paragraph, what you were trying to achieve, why the answer was not already known, and what you tried that failed. If that paragraph is hard to write, the claim is hard to defend. If it writes itself, you may well have something.

Then keep records as you go rather than reconstructing them afterwards: project notes, timesheets showing who spent what on which problem, dated records of approaches abandoned. Contemporaneous evidence is worth vastly more in an enquiry than a well-written narrative produced two years later.

And speak to your own accountant before signing anything with anyone else. R&D relief is one of several reliefs a company can miss for want of asking — as is the funding landscape more broadly, covered in what's actually out there on UK business grants and, for companies raising equity, why investors ask about EIS and SEIS. The relief is real. The cold call is just a very expensive way to find out about it.

Common questions

What counts as R&D for tax relief purposes?

The work must seek an advance in science or technology by resolving scientific or technological uncertainty that a competent professional in the field could not readily resolve. Three parts of that test are commonly failed. The advance must be an advance in the field overall, not simply something new to your business. The uncertainty must be technological rather than commercial, so not knowing whether a product will sell does not count. And it must be genuinely difficult for a skilled practitioner, which excludes routine application of established techniques. Building a standard website or configuring off-the-shelf software almost never qualifies, however much effort it took.

How much is R&D tax relief worth in 2026?

Under the merged scheme, which applies to accounting periods starting on or after 1 April 2024, qualifying expenditure attracts a 20% above-the-line expenditure credit. That credit is taxable, so a company paying corporation tax at 25% retains roughly 15p in the pound. Loss-making SMEs spending at least 30% of their total expenditure on qualifying R&D can instead use Enhanced R&D Intensive Support, which gives an additional 86% deduction and a payable credit of up to 14.5% on surrenderable losses — worth around 27p in the pound. Which route applies depends on your profit position and intensity, not on preference.

Do I need to tell HMRC before making an R&D claim?

Yes, if you are claiming for the first time or have not made a claim in the previous three years. You must submit a claim notification form within six months of the end of the accounting period in which the R&D expenditure was incurred. Missing that deadline invalidates the claim entirely, no matter how strong the underlying case. Separately, every claim requires an additional information form submitted through HMRC's portal no later than the day the corporation tax return is filed, setting out the projects, costs and any agent involved, and naming a senior officer of the company who takes responsibility for its accuracy.

Who is liable if HMRC rejects an R&D claim prepared by an adviser?

The company. The claim is made in the company's corporation tax return, signed off by a named senior officer of the company, so if HMRC disallows it the company repays the relief with interest and potentially a penalty for a careless or inaccurate return. A contingent fee already paid to an adviser is generally not recoverable, and some of the firms that made the most aggressive claims have since ceased trading. Before engaging anyone, ask in writing whether they will defend the claim through an enquiry at no additional cost, and involve your own accountant, who has to file the return the claim sits inside.