The headlines were striking: a football club claiming nearly a quarter of their players' salaries as research and development costs. While this might sound too absurd to be true, it represents a very real problem that's undermining one of the UK's most valuable innovation incentives – the R&D tax credit scheme.

When legitimate businesses struggle to access the support they desperately need for genuine innovation, while others exploit the system for routine activities, we all lose. Are we letting a minority of inappropriate claims destroy the scheme for everyone else?

The Scheme Under Siege

The R&D tax credit scheme has been a remarkable success story for UK innovation. From modest beginnings, it has grown to support £7.5 billion worth of research and development activities by 2023.

But this success has attracted the wrong kind of attention. In 2020, HMRC launched a comprehensive investigation into error and fraud rates within the scheme, dramatically increasing compliance checks. The results were sobering: since 2020, losses due to fraud and error have reached £4.1 billion. This investigation created a backlog that delayed payouts and left genuine innovators waiting months for the support they deserved.

The good news? HMRC is taking action. New claim requirements like the Additional Information Form and the Advance Notification Form send a clear message that inappropriate claims will not be tolerated. But it doesn't have to spell the end of your credit if you're claiming responsibly.

The Dundee United Case Study: When Football Meets "Science"

Perhaps no case illustrates the problem more starkly than Dundee United Football Club's brazen attempt to claim 24% of their players' salaries as R&D costs. The club's reasoning? Their players were supposedly conducting research through training, nutrition programmes, and data collection activities.

Let's be clear: footballers are athletes, not scientists. While their training might generate data and their nutrition might be carefully monitored, any insights gained are incidental to their primary role of playing football. The club's attempts to dress up routine sporting activities as groundbreaking research would be amusing if the consequences weren't so serious.

The flawed reasoning extended beyond player costs. The club claimed their chef's salary as nutrition science research costs, suggesting that preparing meals for athletes somehow constituted advancing the field of nutritional knowledge. As one expert assessment bluntly stated: there was "nothing groundbreaking going on here."

HMRC's response was swift and substantial: a £1.27 million repayment demand.

The case also highlighted another red flag – the involvement of an unscrupulous advisor with a questionable track record. ZLX, a Glasgow-based R&D tax consultancy firm, were behind Dundee United’s claim. The same firm that previously sued a client for refusing to claim R&D credits for routine fridge installation work.

Research carried out by Tax Policy Associates suggests that ZLX have since rebuilt as TaxTek.

Working with Advisors Responsibly

Choosing the right advisor can make the difference between a successful, stress-free claim and years of HMRC scrutiny. Look for advisors with genuine technical expertise who understand both the tax rules and the practicalities of research and development work. They should have established practices and a history of positive client reviews and case studies. Look for advisors who can provide positive case studies and examples of successful disputes with HMRC – this demonstrates they understand the rules and how to defend legitimate claims.

Be immediately suspicious of advisors who promise "free money" or guaranteed claims. Legitimate R&D tax credits aren't free money – they're earned through genuine innovation activities. Similarly, no advisor can guarantee that HMRC will accept any claim without proper review. Ideally, your advisor will support you in the event of a compliance check from HMRC.

Your advisor should take time to understand your actual business activities before suggesting what might qualify for credits. They should ask detailed questions about your projects, review your technical processes, and help you document your activities appropriately. Most importantly, a good advisor will sometimes tell you that certain activities don't qualify for R&D tax credits.

If an advisor’s team seems to be filled with business development or sales roles, it’s maybe worth looking for a team with chartered accountants and technical consultants with industry experience.

Understanding What Truly Qualifies for R&D Tax Credits

The confusion around what qualifies for R&D tax credits often stems from misunderstanding the scheme's fundamental purpose. The credits are specifically designed to incentivise activities that advance scientific knowledge and technological capability.

For an activity to qualify under HMRC’s definition of R&D, it must represent a genuine advance in science or technology that benefits the overall field, not just your business. You must address scientific or technological uncertainty that experts in your field couldn't easily resolve through existing knowledge and standard techniques.

This is a crucial distinction. If you're simply applying well-established methods to solve routine business problems, you're not conducting R&D. The uncertainty must be genuine, and your approach to resolving it must involve systematic investigation and experimentation.

Getting the basics right is essential to avoiding HMRC opening an investigation. However, some companies may still find themselves at the end of a random enquiry; in these cases, having robust evidence for your qualifying R&D projects is crucial to overcoming any compliance check.

Red Flags: When Claims Cross the Line

Recognising inaccurate claims isn't always straightforward, but certain patterns consistently emerge in cases that attract HMRC scrutiny:

Claiming routine operational activities as research is a common error. Every business faces challenges and solves problems, but not every problem-solving activity constitutes research and development. Installing new software, training staff on existing techniques, or adapting standard industry practices to your specific needs typically don't qualify. Footballers’ standard training definitely doesn’t qualify.

Applying arbitrary apportionments without a reasonable basis is another warning sign. Some advisors suggest claiming a fixed percentage of all technical staff time as R&D work, regardless of what those staff actually do. This approach ignores the fundamental requirement that only genuine R&D activities can be claimed. Remember: you can only claim for staff costs spent on R&D, and even activities related to R&D projects don't necessarily qualify if they're not R&D in themselves.

Including standard industry practices as "groundbreaking" work shows a fundamental misunderstanding of the scheme. Just because something is new to your business doesn't make it innovative in the broader sense required for R&D tax credits.

Perhaps most importantly, if your advisor is pushing you to claim beyond what you think is reasonable, treat this as a major red flag. Legitimate advisors help you identify and properly document genuine R&D activities; they don't pressure you to inflate claims or include questionable activities.

The Hidden Costs of Ineligible Claims

The financial consequences of inaccurate claims extend far beyond simple repayment. HMRC can demand full repayment of credits plus interest and penalties, creating substantial cash flow problems for businesses that may have already spent the money. In serious cases of deliberate fraud, criminal prosecution remains a possibility.

But the reputational damage often proves more costly than a repayment order. Businesses found to have made inappropriate claims face ongoing HMRC scrutiny that can affect future tax affairs across all areas, not just R&D credits.

The broader impact extends to the entire R&D ecosystem. The £4.1 billion in losses since 2020 has forced HMRC to implement more stringent checks and longer processing times, affecting legitimate claimants who now wait months for support they deserve.

Most worryingly, continued abuse could lead to scheme restrictions that hurt genuine innovators. Government support for tax incentives depends on public confidence that the money is being used appropriately. High-profile cases of abuse erode this confidence and provide ammunition for those who question whether such schemes represent good value for taxpayers.

Supporting the Scheme's Future

Responsible claiming keeps fraud rates low and maintains public confidence in the scheme's value. This, in turn, ensures continued government support and helps maintain the UK's position as an attractive location for research and development investment.

The R&D tax credit scheme represents one of the UK's most successful innovation policies. But its continued success depends on all of us – businesses, advisors, and policymakers – working together to ensure it supports genuine research and development activities while protecting against abuse.

We're here to clear up the confusion and help you navigate these complex rules responsibly. If you're unsure whether your activities qualify for R&D tax credits, or if you'd like support in preparing a robust, well-documented claim, get in touch with our team to maximise your legitimate entitlements while staying firmly within the rules.

If you’ve fallen victim to a dodgy advisor, or if you think you’ve overstated your claim, HMRC recently launched an R&D disclosure facility for inaccurate claims.

The scheme's future – and the UK's innovation ecosystem – depends on getting this balance right. With proper guidance and responsible claiming, we can ensure that R&D tax credits continue supporting genuine innovation rather than subsidising routine business activities.