However, HMRC has upped its scrutiny around the scheme, with enquiry rates rising from 1% to 20% last year as a result of increasing fraud and mis-claims. Many scaling SMEs rely on this financial injection on their path to innovation so, now more than ever, these businesses need a robust compliance system.

Alongside HMRC scrutiny, the R&D tax claims process is becoming more complex. The addition of the Enhanced R&D Intensive Support (ERIS) scheme, aimed at loss-making R&D-intensive SMEs, and the Merged R&D Expenditure Credit (RDEC) scheme for all UK companies conducting qualifying R&D, means businesses will have to navigate the challenges of four schemes operating at once.

A culture of compliance ensures a more efficient claims process, faster payments, and a lower risk of enquiry. With increasing chances of an enquiry, having good records means businesses can respond quickly and effectively, giving them the best opportunity to defend their claim.

Why a culture shift is necessary

Historic fraud and error has led to more stringent enquiry processes. HMRC’s Mandatory Random Enquiry Programme (MREP) initiative adds further risk of enquiry to businesses. The random selection and detailed examination of a representative sample of claims helps HMRC identify common errors, potential fraud and misunderstandings of eligibility criteria.

While these two factors are key drivers for businesses to tighten up their processes, compliance isn’t just about meeting HMRC’s rules. Fundamentally, it’s about building a system that makes claims easier, faster, and more robust in the long run.

Given that R&D isn’t always at the top of the list, it’s important to have the right infrastructure in place to avoid issues further down the line. By tracking R&D activities and embedding compliance into everyday operations, businesses can protect their claims and get tax relief without complexity.

Five ways to build and maintain a culture of compliance

HMRC enquiries cannot be avoided, but businesses can reduce their risk by making their claim more robust from the outset.

Here are five steps that you should take:

Maintain clear and accessible records

Documentation sits at the heart of compliance. Everything must be logged clearly for easy accessibility, including staff hours, project milestones, software costs and other qualifying R&D expenses. There are plenty of tools available to automate the tracking of projects and expenditure such as Jira, Trello, and Xero.

Keep your team in the loop

Whether they know it or not, every single team member is a contributor to business compliance. It’s therefore in your best interest to educate your team on what HMRC deems as R&D, what expenses qualify, and how to correctly document it. This is where regular training sessions and team workshops can help finance and technical departments tighten up their reporting.

Leverage technology where you can

Technology can make compliance faster and more reliable. R&D tax credit platforms can integrate with tools like Xero and track time allocations, so you have a clear audit trail. Embedding compliance into business processes is vital; if teams don’t have a system in place, things fall through the cracks, and they’re left exposed when it comes to submitting claims.

Hope for the best, plan for the worst

As we well know, HMRC conducts random checks – regardless of whether the claim is valid or not. Having complete confidence in your claims will only aid your organisation if it comes to an enquiry. The process is likely to be a lot shorter and smoother for one thing. You should therefore make sure your technical narratives and financial documentation are watertight, as HMRC needs to see evidence that the work is solving a technological uncertainty.

Ask for help early on

As HMRC scrutiny increases, it becomes more important to review processes and identify gaps in resource or expertise as early as possible. Claiming R&D tax credits can be complex, with risks of misclassifying costs, missing documentation, or just generally failing to meet evolving requirements. A specialist advisor has experience submitting numerous claims and will be well versed in the latest regulatory requirements. Their advice will give you the confidence that your claim is in the best possible shape.

The secret to R&D relief success

Compliance requires a proactive approach. By following these five steps, businesses can get R&D tax credits faster, reduce the risk of costly mistakes and be ready should an HMRC enquiry arise.

Inaccuracies in R&D tax credit claims can result in unnecessary financial and productivity losses. A culture of compliance is therefore not just about protecting a claim, but it’s also – more critically – about long-term sustainability so businesses can innovate with confidence.

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