This article is the first in a series designed to help you optimise your R&D tax credit claim in 2025. Whether you’ve just completed your year-end or are approaching it soon, now is the perfect time to get your recordkeeping in order.
For startups and small businesses, especially in tech, R&D can feel overwhelming. With teams juggling multiple projects, R&D tax relief often gets overlooked. In the rush to innovate, record-keeping can slip through the cracks, an oversight that can be costly.
Without a clear process to document R&D activities, you risk missing claimable costs or facing an HMRC enquiry.
The solution? A consistent record-keeping system that tracks all R&D activities year-round. This helps to ensure you get the maximum tax relief, simplifies claims, and keeps you compliant, avoiding any nasty surprises at submission time.
Insights from the EmpowerRD Webinar
In this article, we share key insights from the EmpowerRD webinar, “How to Be a Good R&D Claimant,” featuring advice from Dave Sellick (Sidgrove Accounting – Owner), Alex Riseley (Streetbees – Financial Controller), and Dr. Matthew Rix (EmpowerRD – Tax Expert). They share their experiences and advice on good R&D record-keeping.
Watch this webinar clip to learn more about the importance of record-keeping for R&D tax claims!
Want to learn more? Watch the full webinar for expert advice on how to be the best R&D tax claimant you can be, ensuring a compliant and optimised claim.
The negative impacts of poor R&D recordkeeping
Missed claimable costs
One of the biggest challenges in R&D recordkeeping is missing out on claimable costs. Without a system, it’s easy to let staff time, consumables and software slip through the cracks. All of these are costs that could potentially be included in your R&D tax claim. However, when things aren’t documented properly, it’s much harder to prove what qualifies, leading to missed opportunities and potentially less payout.
Alex, Financial Controller at Streetbees, understands this firsthand. Having led the R&D claims process in collaboration with EmpowerRD, Alex has successfully overseen seven claims. Reflecting on the importance of a solid framework, he notes:
“Without a framework in place, things fall through the cracks, and you’re exposed when it comes to submitting claims.”
Increased risk of errors and an enquiry
As Alex points out, it’s not just costs that you risk missing out on, lost records, unclear documentation, or a lack of understanding about what qualifies as R&D can leave you exposed and result in incorrect claims. This might mean under-claiming or over-claiming, both of which can lead to problems and significantly raise the likelihood of an HMRC enquiry.
The importance of structured recordkeeping for R&D claims
Keeping your system organised is essential for an accurate and optimised R&D tax claim. With everything in order, it’s much easier to track staff time, consumables, and project costs, ensuring nothing is overlooked when it’s time to submit your claim. It also makes things simpler for your R&D provider or accountant, helping the process run smoothly from start to finish.
Simplifying the process and saving you time
A structured system not only ensures compliance but also simplifies the process of making your R&D claim. Less time is spent scrambling for information at claim time and it makes for a smoother more efficient claim process overall. The more organised your system, the easier it is to submit on time and accurately.
Minimising the risk of a lengthy enquiry
On top of this, HMRC also now operates a random enquiry programme, so having a structured recordkeeping system reduces the risk of issues. Proper documentation means you can provide evidence quickly if HMRC asks for it. When you can show what was spent on R&D, how staff time was allocated and what projects were worked on, it’s easier to prove your claim is legitimate and compliant.
As Matthew Rix, R&D tax consultant at EmpowerRD, explains:
“The key is to know what qualifies as R&D, track it and document it properly—then if HMRC comes knocking, you’re ready.”
How to build a strong R&D recordkeeping system
A robust recordkeeping system is the foundation of a successful R&D tax credit claim. It helps you track eligible projects, accurately calculate qualifying costs, and demonstrate compliance to HMRC.
Here’s how to build one:
- Educate your team: Ensure everyone involved in R&D understands what qualifies for R&D tax relief and what needs to be documented. This prevents missed opportunities and saves time down the line.
- Use project management tools: Tools like Jira, Trello, or Asana help you track R&D projects effectively. “From a technical perspective, tools like Trello can really help show how an R&D project develops over time. You might have multiple projects running, or just one, but it’s crucial to know when the R&D project began, what milestones were hit, and how staff time was allocated,” explains Matthew Rix, R&D tax consultant at EmpowerRD. Essentially, document everything: milestones, challenges, solutions, and staff time allocation. The more detailed your records, the stronger your claim.
- Integrate with accounting software: Connect your project management tools with accounting software like Xero. This streamlines information flow and ensures accurate recordkeeping.
- Leverage time-tracking tools: Tools like Pinto and Payfit accurately log staff hours on R&D projects. This is crucial for calculating qualifying costs and demonstrating compliance.
- Utilise an R&D tax credit platform: Platforms like EmpowerRD’s offer features that simplify recordkeeping and optimise your claim:
- Seamless integration: Automatically pulls financial data from Xero, saving time and reducing errors.
- Simplified time tracking: Easily links time allocation to specific projects for accurate cost calculations.
- Enhanced collaboration: Provides a central hub for finance teams, technical staff, and R&D tax experts to collaborate.
- Streamlined claim process: Guides you through the claim process, ensuring you capture all eligible expenses and documentation.
- Maintain frequent communication: Schedule regular check-ins with your technical team to stay on top of R&D activities. “Make sure you set up touchpoints with the tech team throughout the year, otherwise you’ll be scrambling when it’s time to file your claim,” advises Alex.
- Categorise costs properly: Separate direct costs (staff wages, consumables) from indirect costs (admin, support staff). Accurate cost categorisation is essential for optimising your claim.
Last thoughts…
Claiming R&D tax credits can be complex, but a strong recordkeeping system makes it easier. By following the strategies in this article — educating your team, using project management tools, integrating accounting software, leveraging time-tracking tools, and using an R&D tax credit platform — you’ll be ready to track eligible projects, calculate costs accurately, and maintain the records required for compliance.
With HMRC scrutiny increasing, staying organised is more important than ever. Good recordkeeping helps optimise your claim, shows transparency, and reduces the risk of enquiries. If selected for HMRC’s random enquiry programme, you’ll be prepared to secure the full benefits of your innovation.
For extra support, consider consulting an R&D tax expert.
