Why has HMRC rejected my R&D tax credit claim?

A rejection almost always comes down to HMRC concluding that the activity described does not meet the statutory definition of qualifying R&D, or that the costs claimed against it were not eligible. HMRC's caseworkers are trained to look for a competent professional in the field being genuinely unable to know how to achieve the advance at the outset, not simply for something new to your company.

Common patterns include: claims built around standard software development, configuration or integration work rather than genuine technological advance; narratives that describe business benefits rather than technical uncertainty; and cost workings that include non-qualifying items such as capital expenditure, rent, or work that was subcontracted or subsidised without the correct treatment.

HMRC has significantly increased its compliance activity in the R&D sector in recent years, following widespread concern about erroneous and fraudulent claims, particularly those prepared by unregulated boutique advisers working on contingent fees.

Qualifying R&D relief sits in Part 13 Corporation Tax Act 2009 (opens in a new tab) at legislation.gov.uk, read alongside the separate BEIS (now DSIT) guidelines that define what counts as R&D for tax purposes. The test is whether the project sought an advance in science or technology through resolving scientific or technological uncertainty that a competent professional could not readily have resolved.

HMRC will typically ask a caseworker, sometimes with input from an internal or external technical specialist, to assess whether the project narrative demonstrates this uncertainty convincingly, project by project, rather than at the level of the whole company or product line.

Where a claim is rejected in full or in part, HMRC sets out its reasoning in a closure notice issued under Schedule 18 Finance Act 1998, which amends the return to remove the disallowed relief.

Read the rejection letter carefully and identify exactly which projects or cost categories HMRC has challenged, rather than assuming the whole claim has failed. Partial rejections are common.

Gather contemporaneous evidence — design documents, test logs, failed approaches, developer time records — that shows the technical uncertainty at the time the work was done, not evidence written up afterwards purely to support the claim.

If your original claim was prepared by an adviser who used generic or template narratives, get an independent technical review before deciding whether to challenge HMRC's decision or accept it.

A rejected claim means the relief or credit is removed from your return, and if any credit was already paid, HMRC will seek repayment plus interest, and potentially a penalty for an inaccurate return.

Reconstructing evidence and mounting a properly argued challenge takes specialist technical and tax input, which adds cost on top of any repayment. Growth plan clients have free tax investigation insurance included, covering our fees for defending a claim like this — see /fees.

Weigh the strength of the underlying technical case honestly before committing further fees to an appeal that is unlikely to succeed.

Do not resubmit the same narrative with cosmetic changes; HMRC will treat this as further evidence the underlying activity does not qualify.

Do not miss the appeal deadline while you gather evidence — request a review or lodge a protective appeal within the statutory window and add detail afterwards.

Do not assume a rejection on one project means every project in the claim fails; each should be assessed on its own technical merits.

You can ask HMRC for an internal statutory review, carried out by an officer not previously involved in the case, or appeal directly to the First-tier Tribunal within the statutory window.

Where the technical case is genuinely strong but was simply argued poorly, a well-evidenced review request often succeeds without the cost of a tribunal hearing.

Where the underlying work realistically does not meet the qualifying test, accepting the decision and correcting future claims is usually the more cost-effective path.