At Williamson & Croft, we specialise in helping UK companies navigate the complexities of Research and Development (R&D) tax relief. While this government incentive offers significant financial benefits, it is not without its challenges. HMRC scrutiny of claims, particularly in the technology sector, has increased in recent years, with many valid claims initially rejected due to misunderstanding of technical details or project objectives.

This case study outlines how we successfully defended an R&D tax relief claim for a UK technology client following an initial rejection by HMRC.

Our strategic, technically robust approach resulted in the claim being upheld, delivering essential cashflow benefits to the business.

The Client and the Project

Our client is a software development company based in England. The company specialises in advanced AI integration and enterprise software solutions for sales automation. Their project involved developing a platform designed to integrate private, access-controlled document repositories and structured activity logs with Large Language Models (LLMs) to enable intelligent, autonomous support for sales teams.

The project aimed to create functionality beyond what was publicly available at the time, including the ability for LLMs to interpret private business data in real-time and generate deterministic, structured outputs that could be integrated into automated workflows.

The company initially submitted its R&D claim independently, based on its understanding of the guidelines. However, shortly after submission, HMRC opened a formal enquiry, raising concerns about the eligibility of the project and the validity of the claim.

HMRC’s Initial Rejection

Following several rounds of correspondence, HMRC issued a letter rejecting the R&D claim.

Their position was that the project did not constitute an appreciable improvement to the field of science or technology. HMRC argued that the company’s work relied on existing, publicly available technology, including LLMs such as those developed by OpenAI, and that integrating these tools into a sales platform was not a technological advance.

Further, HMRC asserted that the project did not involve the resolution of scientific or technological uncertainties, suggesting that the work undertaken would have been readily deducible by a competent professional. They also questioned the company’s ability to demonstrate how its approach differed from other similar systems available in the public domain.

This rejection presented significant risks for the client, both financially and reputationally. The company believed strongly that its work met the criteria for R&D tax relief but required specialist assistance to present a compelling, evidence-based defence to HMRC.

Our Approach

Upon being engaged, our team conducted a comprehensive review of the project, the original submission, and HMRC’s correspondence. We quickly identified that the company’s technical advancements had not been communicated in sufficient detail and that HMRC’s rejection was based on an incomplete understanding of the work undertaken.

We worked closely with the company’s technical team to gather the necessary evidence and clarify the project’s innovative elements.

Our response to HMRC included detailed technical documentation, references to relevant guidelines from the Department for Business, Energy & Industrial Strategy (BEIS), and an explanation of how the project addressed genuine scientific and technological uncertainties.

We also cited relevant case law, including Get Onbord Ltd v HMRC, which established that once a claimant provides sufficient detail, the burden shifts to HMRC to present evidence to the contrary.

We maintained a firm yet professional stance throughout the process, pushing back against unsupported opinions and ensuring HMRC’s conclusions were properly scrutinised and evidenced.

The Outcome

Following our detailed submissions and sustained engagement with HMRC, the claim was ultimately upheld.

HMRC accepted that the project did in fact meet the criteria for R&D tax relief, recognising the presence of technological uncertainties, the appreciable improvement achieved, and the company’s methodical approach to experimentation and problem-solving.

The client received the financial benefit of the claim without penalties or further challenge. This allowed the business to reinvest in ongoing innovation and provided reassurance regarding their approach to future R&D projects.

The Importance of Specialist Support for R&D Claims

This case highlights the importance of expert support when preparing or defending an R&D tax relief claim, particularly for complex technology projects. HMRC’s interpretation of the guidelines is becoming increasingly rigorous, and many valid claims face rejection due to insufficient technical explanations or a lack of strategic defence.

At Williamson & Croft, we provide comprehensive support throughout the R&D claim process.

This includes assessing project eligibility, preparing detailed technical reports, calculating qualifying expenditure, and representing clients during HMRC enquiries. Our team combines technical expertise with in-depth knowledge of HMRC processes to maximise claim success and minimise risk.

Whether your business operates in software development, engineering, manufacturing, or emerging technologies such as AI, we can help you navigate the complexities of R&D tax relief.

Conclusion

This case demonstrates that even when an R&D claim is initially rejected, it is possible to achieve a successful outcome with the right technical defence and strategic approach.

Our expertise ensured that our client’s innovative work received the recognition and financial support it deserved.

If your business undertakes innovation and requires assistance with an R&D tax relief claim, or if you are facing an HMRC enquiry, contact us today to discuss how we can support you.