There isn’t a great deal of government money readily available to businesses at the moment.
However, Research and Development tax relief remains an established route through which companies undertaking genuine innovation may obtain valuable tax support, improving their cash position. Depending on the company’s circumstances and the applicable scheme, that support may reduce its Corporation Tax liability or produce a payable credit or expenditure credit.
But R&D tax relief isn’t a grant, a reward for being inventive or an opportunity to relabel ordinary business improvements as research.
The project must meet the tax definition of R&D. The company must identify the relevant scientific or technological advance, the uncertainties encountered, the work undertaken to overcome them and the qualifying expenditure incurred. The company also remains responsible for the facts supporting its claim, even where professional advisers are involved. (GOV.UK)
HMRC is looking far more closely at R&D claims
The days when an R&D claim could be prepared using a short retrospective narrative and a broad percentage of staff costs are firmly behind us.
HMRC’s detailed report for 2023/24 shows just how much its approach has changed. It reported that:
- more than 500 people were working on R&D compliance, compared with around 100 in 2020/21;
- 9,700 claims were subject to compliance checks;
- compliance coverage had increased to 17% of claims;
- £441 million of incorrectly claimed relief was identified; and
- 77% of completed checks resulted in an adjustment.
HMRC is also using the Additional Information Form, claim notifications and better risk assessment data to target claims for examination. (GOV.UK)
That doesn’t mean eligible companies should be frightened away from claiming. It means the claim needs to be properly investigated, evidenced, calculated and documented before it is submitted.
The question accountants now need to ask themselves
Most accountants are general practitioners. They deal with accounts, Corporation Tax, VAT, payroll, personal tax and a wide range of commercial issues.
They cannot reasonably be expected to be specialists in every technical area.
R&D tax relief is particularly difficult because it combines:
- detailed tax legislation;
- HMRC’s specialist R&D guidance;
- the tax definition of science and technology;
- technical evidence obtained from engineers, developers or other competent professionals;
- complex rules concerning qualifying expenditure; and
- judgement over whether the available evidence supports the claim.
And most deal with such calculations infrequently.
The important question is therefore not simply:
“Can I enter the claim on the company’s tax return?”
It is:
“Do I have sufficient knowledge and evidence to associate my firm with this claim, or do I need specialist support?”
What PCRT 2026 says
The current edition of Professional Conduct in Relation to Taxation took effect on 1 January 2026. It applies to members of the seven accountancy and taxation bodies that jointly produced it.
PCRT requires professional competence and due care. It says that a member:
- must carry out work with the requisite skill and care;
- is expected to have an inquiring mind and exercise professional judgement;
- should remain within the agreed scope of their engagement;
- should check that their professional indemnity insurance covers work which extends beyond that scope; and
- must not undertake work they are not competent to perform unless appropriate assistance is obtained from a suitably qualified specialist.
It also says that a member giving a significant opinion should consider obtaining a second opinion.
ICAEW’s specific guidance on R&D tax credit services is even clearer. It states that members must not provide R&D tax advice unless they are competent to do so. It identifies inadequate technical knowledge, insufficient client interaction, weak project descriptions, unsupported staff-time estimates and claims prepared from the accounts alone as indications that the required professional standards may not have been met. (ICAEW)
Does using a specialist remove the accountant’s responsibility?
No… but neither does it mean that the accountant must repeat all the specialist’s work.
PCRT guidance says that a tax agent isn’t required to audit the figures or independently verify every piece of information provided by the client or a third party.
However, the accountant must not associate themselves with facts they know or believe are incorrect or misleading. They must not include a tax position which they consider has no sustainable basis. They should also consider whether it needs to be made clear that particular information or advice has come from a third party. (ICAEW)
A good R&D specialist should therefore provide the accountant with:
- clear instructions for the Corporation Tax return;
- an explanation of the qualifying projects and expenditure;
- sufficient supporting evidence;
- details of any judgemental or uncertain areas;
- confirmation that the directors have reviewed and approved the claim; and
- help if HMRC raises questions.
That allows the accountant to retain control of the client relationship without pretending to possess specialist knowledge they do not have.
For company directors… make the right claim, not the largest claim
A badly prepared R&D claim may initially produce cash or reduce an existing tax liability. That does not mean the money is secure.
If HMRC later rejects the claim, the company may have to repay the relief, together with interest and potentially also penalties. It may also incur professional costs responding to a lengthy compliance check.
The right adviser should therefore be prepared to tell a company:
- when a project qualifies;
- which costs can properly be claimed;
- what evidence is required;
- where the claim is uncertain; and
- when the project simply does not qualify.
An adviser who says “no” when the evidence is insufficient may be providing a more valuable service than one who produces the largest number.
For accountants… specialist support can protect the practice as well as the client
Bringing in a specialist does not mean losing the client.
Handled properly, it allows the accountant to continue advising on the company’s wider tax and financial affairs while obtaining technical help in an area that often arises only occasionally. And sometimes that can be done without the client knowing you have brought in an expert. Having said that, bringing in a specialist is a sign of strength, not weakness.
Bringing in outside specialist support can also help the firm:
- demonstrate compliance with PCRT;
- define the scope of its own engagement clearly;
- reduce the risk of unsupported claims being submitted;
- maintain a proper audit trail;
- respond more effectively to an HMRC compliance check;
- protect its reputation; and
- manage potential professional indemnity insurance exposure.
Professional indemnity policies differ, so accountants should review their own cover, engagement letters and notification obligations. But the broader point is simple… specialist work should be undertaken by people who genuinely understand it.
Introducing Innovation Liquidity Partners
I am pleased to introduce Kevin Johnson of Innovation Liquidity Partners Limited.
ILP supports both companies making R&D claims and accountants advising those companies. Kevin can assist with claims at any stage, including the technical work, tax calculations and preparation for an HMRC compliance check. Kevin and his co-director also have experience of defending claims originally prepared by other advisers. (IL Partners)
For accountants, ILP’s approach is collaborative. The accountant retains the client relationship, while ILP supplies specialist assistance, explanations and support. Most of ILP’s R&D engagements are undertaken for fixed, value-based fees. They also avoid contingency fees and do not tie clients into lengthy contracts. (IL Partners)
For companies, the objective should not merely be to submit an R&D claim. It should be to submit a claim that is technically accurate, supported by contemporary evidence and capable of being explained if HMRC asks difficult questions.
To discuss a potential claim, an existing claim or the support available to accountancy practices, contact:
Kevin Johnson
Innovation Liquidity Partners Limited
Website: www.ilpartners.co.uk
Email: kevin@ilpartners.co.uk
Further reading
- Professional Conduct in Relation to Taxation… effective from 1 January 2026
- ICAEW commentary on the January 2026 PCRT changes
- ICAEW guidance on R&D tax credit services
- HMRC’s approach to R&D tax relief compliance
- HMRC’s expectations of companies making R&D claims
Please note that I, Paul Brindley, nor my firm receive any commission or referral fee for making this introduction to ILP, I just want you, the accountant or their client, to do the right, defensible, thing.