HMRC’s approach to R&D tax relief enquiries has changed fundamentally. While advisers may be seeing fewer outright challenges to claims in the last six to nine months, those enquiries that do arise are far more forensic than in the past. The era of narrative-led claims, lightly supported by assumptions and after-the-event explanations, is effectively over.
Instead of debating whether an activity “sounds innovative enough”, HMRC caseworkers are now focused on evidence. Every aspect of a claim must be proven, and where evidence is missing, claims are being reduced heavily or denied altogether. Simon Briton’s webinar Essential Records Clients Need to Support R&D Tax Claims sets out clearly what HMRC are asking for, why enquiries have become so demanding, and where claims most commonly unravel.
From Innovation Debates to Evidence-Based Enquiries
Historically, HMRC enquiries often centred on whether a project met the innovation threshold. Caseworkers would challenge the technical narrative, arguing that the company was merely catching up with existing industry practice rather than pushing the boundary of knowledge. This approach was frustrating for claimants, particularly because HMRC caseworkers are rarely industry specialists and were often perceived as misunderstanding the commercial or technical context.
That focus has now shifted. Rather than dismissing a claim on the basis of opinion, HMRC are asking claimants to prove their position. Instead of saying “this isn’t innovative”, they ask: what evidence do you have that it is? If the evidence is not there, the conclusion is simple – the claim has not been substantiated.
At its core, HMRC’s enquiry boils down to two fundamental questions:
- Was there a systematic investigation of an identified knowledge gap?
- Were the costs claimed actually incurred on the activities described?
Every long, detailed enquiry letter – however overwhelming it may feel – is simply a different route into one or both of these questions. Without records that clearly evidence both points, a claim is on extremely weak ground.
The First Point of Failure: Blurring R&D with Business as Usual
One of the most common reasons claims fall apart is a failure to clearly differentiate R&D activity from normal commercial operations.
HMRC will not accept that a company has carried out R&D simply because it encountered challenges while doing what it does every day. If the activity looks like routine delivery, optimisation, or implementation, with no clear departure from business as usual, HMRC will conclude that there was no qualifying project at all.
Claims must show that the company deliberately stepped away from its standard commercial activity to pursue a specific technical or scientific uncertainty. That means:
- Setting out enough background to explain what the business normally does
- Clearly carving out the R&D as a distinct “side quest”, not just a by-product of routine work
- Demonstrating that time and resources were consciously committed to resolving an uncertainty with no guaranteed outcome
Where claims rely on vague statements such as “we were doing what we always do and discovered something new”, HMRC are now far less willing to engage. Without clear delineation, they will not accept that a systematic investigation ever took place.
The Missing Baseline: IP Landscaping and Knowledge Reviews
Another major pressure point in enquiries is the absence of evidence showing that the company understood the existing state of knowledge before the project began.
HMRC are increasingly asking how claimants established the baseline knowledge against which an advance was being sought. While there is no explicit requirement in the legislation to conduct a formal IP landscaping review, in practice HMRC expect to see evidence that the company checked what already existed.
The logic is straightforward: if you do not know the current limit of knowledge, you cannot credibly claim to be trying to advance it. Saying “we work in the industry, so we just know” is no longer sufficient. Unless the company is an acknowledged expert – and can evidence how it reached that level of expertise – HMRC will expect to see records of research, reviews, or market analysis undertaken before the project started.
This is also why definitive project start dates matter. A project cannot properly begin until the baseline knowledge has been established. Without evidence of that preparatory work, HMRC may argue that the project start date is artificial, or that no qualifying project existed at all.
The Cost Question: Why Percentages No Longer Work
Even where HMRC accept that qualifying R&D activity took place, claims frequently fall apart when it comes to costs.
Blanket percentages – such as claiming 50% of a developer’s time across an entire year – are now highly vulnerable. HMRC want to understand how those figures were calculated and what evidence supports them. Assumptions based purely on job roles or seniority are not enough.
To withstand scrutiny, claimants must be able to link:
- Specific people
- To specific R&D activities
- Over identifiable periods of time
Without records that demonstrate this link, HMRC will view the cost allocation as guesswork. Where evidence cannot be produced, costs are routinely reduced or removed entirely.
Why Evidence Can’t Be Retrofitted
A recurring theme in HMRC enquiries is that much of the required evidence cannot be created after the event. Attempts to reconstruct decision-making, research, or time allocation months or years later are often unconvincing and internally inconsistent.
This is why Simon Briton emphasises that robust claims are built during the project, not at the point the tax return is prepared. The aim is not to drown clients in administration, but to put in place proportionate records that demonstrate:
- What uncertainty was being addressed
- Why it was uncertain at the outset
- What steps were taken to resolve it
- Who was involved, and when
When those records exist, even a 20-page enquiry letter becomes manageable. When they do not, the claim is exposed.
Getting Ahead of the Inevitable Challenge
HMRC are not shy about reducing or denying claims that cannot be evidenced. The shift away from subjective innovation arguments towards hard evidence means advisers must now focus less on storytelling and more on contemporaneous records.
Good R&D claims are no longer about persuasive narratives alone. They are about demonstrating discipline: clear project definition, early knowledge reviews, and defensible cost allocation. Helping clients understand what “good” looks like in practice is now essential if claims are to stand up to scrutiny in an increasingly rigorous enquiry environment.
Frequently Asked Questions
1. Why does HMRC seem tougher on R&D claims than before?
HMRC’s approach has shifted from debating whether an activity sounds innovative to requiring evidence that it was qualifying R&D. While there may be fewer enquiries overall, those that do arise are significantly more detailed and demanding. Caseworkers now expect claimants to prove every aspect of the claim with contemporaneous records. Where evidence is missing, claims are routinely reduced or denied.
2. What are HMRC actually trying to establish in an enquiry?
Despite the length and complexity of enquiry letters, HMRC are fundamentally focused on two questions:
Was the project a systematic investigation of an identified knowledge gap?
Were the costs claimed genuinely incurred on the activities described?
Every detailed question HMRC asks is simply another way of testing one or both of these points.
3. Is HMRC still challenging whether projects are “innovative enough”?
Less so than in the past. Historically, HMRC often rejected claims by arguing that the work did not represent an advance in the field. Today, rather than making subjective judgments, they ask claimants to provide evidence that an advance was being sought. If the evidence is not there, HMRC will conclude that the claim has not been proven.
4. Why is separating R&D from business as usual so important?
HMRC will not accept that R&D has taken place if the activity looks like routine commercial work. Claims fail when businesses cannot clearly demonstrate that they stepped away from normal operations to pursue a specific technical or scientific uncertainty.
To qualify, the R&D must be shown as a distinct project, not just a challenge encountered during everyday delivery.
5. Can routine problem-solving count as R&D?
Only if it involves genuine uncertainty and a structured attempt to resolve it. If the work is something the company does regularly, with known methods and predictable outcomes, HMRC will treat it as business as usual. Accidental discoveries or improvements arising from routine work are unlikely to qualify.
6. What does HMRC mean by a “systematic investigation”?
HMRC expect evidence that the company:
Identified a specific uncertainty or knowledge gap
Considered existing knowledge before starting
Planned and carried out work to resolve that uncertainty
Accepted there was no certainty of success at the outset
This does not require academic-style documentation, but it does require clear, logical records showing how the work progressed.
7. Why is HMRC asking about IP landscaping or baseline knowledge?
HMRC are increasingly focused on how companies established what was already known before the project began. The reasoning is simple: you cannot aim to achieve an advance unless you understand the current state of knowledge.
While there is no formal requirement in the legislation to carry out an IP landscaping review, HMRC now routinely ask how claimants built their understanding of the baseline. Simply saying “we work in the industry” is no longer enough.
8. Do we have to carry out a formal IP review?
Not necessarily, but you do need evidence that some form of research or review took place before the project started. This could include:
Market research
Competitor analysis
Technical literature reviews
Internal research discussions
What matters is being able to demonstrate that the company checked whether the problem had already been solved elsewhere.
9. Why is the project start date so important?
A project cannot genuinely start until the baseline knowledge has been established. Without evidence of pre-project research, HMRC may argue that the start date is artificial or that no qualifying project existed at all. Clear records help demonstrate when and why the project began.
10. Why are HMRC challenging staff time percentages?
HMRC are increasingly sceptical of blanket time allocations, such as claiming a fixed percentage of someone’s time across an entire year. They want to understand how those figures were calculated and what evidence supports them.
Assumptions based solely on job roles or seniority are unlikely to be accepted without supporting records.
11. What kind of evidence does HMRC expect for staff costs?
HMRC expect claimants to be able to link:
Individuals
To specific R&D activities
Over identifiable periods of time
This does not always require detailed timesheets, but there must be a reasonable and evidenced method for allocating time to qualifying work.
12. Can we reconstruct evidence after HMRC open an enquiry?
This is increasingly risky. Many of the records HMRC want to see – such as baseline research, decision-making, and activity planning – cannot be convincingly recreated after the event. Retrospective explanations often lack consistency and credibility, which weakens the claim.
13. Does this mean R&D claims now require excessive administration?
No. HMRC are not asking for academic papers or burdensome bureaucracy. They are asking for proportionate, practical records that demonstrate what was done and why. The goal is not to drown businesses in admin, but to ensure claims are defensible.
14. What happens if we can’t provide the evidence HMRC asks for?
If evidence is missing or weak, HMRC are increasingly willing to reduce claims significantly or deny them altogether. They are explicit that claims must be proven, and they are not reluctant to remove costs where the link to qualifying activity cannot be demonstrated.
15. How can businesses protect themselves against future enquiries?
The key is to put records in place during the project, not at the point the tax return is prepared. Clear project definitions, early baseline research, and sensible cost allocation methods make enquiries far easier to manage and greatly increase the likelihood that a claim will stand up to scrutiny.
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article. The information at the time of publishing was accurate and could be subject to final changes.
