How Smart Scale-Ups Use R&D Tax Relief to Power Growth — and Avoid HMRC Pitfalls

Entrepreneur

11-07-2025

Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur United Kingdom, an international franchise of Entrepreneur Media.
With the UK government pledging £86bn to fuel science and technology, R&D tax relief is set to become a vital lifeline for scaling tech companies. But with tighter compliance, shifting rules, and rising rejection rates, accessing these incentives is no longer straightforward. Robert Whiteside, CEO of EmpowerRD, shares how his hybrid platform is helping time-poor founders reclaim more, stay compliant - and future-proof their innovation strategy in a fast-changing policy landscape.
1. What opportunities does the government's latest R&D funding injection create for UK tech scale-ups?
The UK Government's commitment to inject £86 bn into the UK's fastest growing sectors across science and technology by the end of this Parliament (including £2bn dedicated to its AI Action Plan), combined with the recent announcement of a ten-year plan for public R&D investment, are a strong signal of intent to support innovation-led growth. For tech scale-ups, this means more access to non-dilutive capital, especially through R&D tax relief. This will allow founders to reinvest in product development, recruit talent and explore new territories. This funding, if paired with clearer guidance and a more digital-first approach to processing claims, could help address concerns around eligibility and compliance. It's a huge opportunity for tech scale-ups in the long term as they continue to build strategies with innovation at their heart.
2. Where do most scale-ups go wrong when applying for R&D credits?
Poor record-keeping is the most common mistake we see. Many scale-ups end up making hasty and incomplete claims because they fail to track eligible R&D activity in real time. We have also noticed some confusion around eligibility, which has led to fewer claim applications. Some businesses miss deadlines, particularly in light of the new Claim Notification rule, which requires certain companies to notify HMRC within six months of the end of their accounting period. If you don't notify in time, you lose the right to claim - no exceptions. This rule mainly affects first-time claimants, companies that haven't claimed in the last three years, and those amending a return for an earlier period. Another common issue is falling behind HMRC's changing requirements, like the tighter rules on overseas R&D and the new Additional Information Form.
The complexity that comes with HMRC's enhanced compliance has contributed to the 21% drop in claim applications recorded by HMRC in 2022–23 compared to 2021–22. That's why it's so important for businesses to stay organised, keep up with the latest rules and seek expert guidance when it comes to making a claim, as this can ultimately be the difference between a successful or unsuccessful claim.
Related: Turning Innovation into Reality
3. How does EmpowerRD streamline the R&D claims process for time-strapped founders?
Our hybrid approach of combining tax experts with cutting-edge technology makes R&D claims fast, accurate and stress-free. Our platform simplifies data collection and tracks your claim value in real time, while our expert advisors help construct a strong technical narrative that's fully compliant with HMRC guidelines and provide hands-on support
throughout the process. This approach has allowed us to retain a low enquiry rate of less than 5% of claims submitted, compared to HMRC's enquiry rate of 20%. We manage the end-to-end process, so time-strapped founders don't need to stress about compliance or navigate complicated tax jargon. This saves time and strengthens the claim, often increasing claim value too. Companies like Streetbees, for example, saw a 170% increase in claim value and avoided HMRC scrutiny entirely when using EmpowerRD.
4. How will R&D policy shifts shape UK tech in the next decade?
The R&D policy is encouraging UK-based innovation. Over the next decade, we expect to see an ecosystem where well-documented, high-quality R&D continues to be rewarded. This will raise the bar for compliance, but also encourage companies to make significant investments in innovation. Additionally, a digital-first approach to making R&D tax claims will become the norm. It will make the claims process simpler, more transparent and help cut down the need for manual administration.
5. What can scale-ups do now to future-proof their R&D strategy?
A resilient R&D strategy starts with protecting the funding that fuels it, and for many scale-ups, R&D tax relief is a critical part of that equation. Given that 20% of all claims receive an HMRC enquiry, it's essential to get the basics right: maintain accurate records of R&D activities, understand eligibility and compliance requirements, and track claimable expenses in real time.
Staying on top of policy changes is equally important - factor in changing rates and assess the impact of overseas R&D restrictions. If you're nearing the 40% R&D spend threshold, explore whether the Enhanced R&D-Intensive Support could enhance your return.
Finally, because R&D claims play a critical role in funding innovation, they should be treated as a core part of your financial strategy and not just a tax benefit. Partnering with an expert can help ensure compliance, reduce the risk of HMRC enquiries, and protect this vital source of non-dilutive capital.
6. How can maximising R&D incentives fuel long-term innovation and competitive edge for scale-ups?
The UK has become home to a thriving ecosystem of innovation. The recent government announcement of £13.9bn in R&D funding is a significant step towards reinforcing economic momentum. R&D incentives can help release funds that can be instantly reinvested in innovation, product and technological advancements. This scheme remains one of the most impactful mechanisms to support growth and innovation for scale-ups. When strategically applied, R&D tax relief creates a snowball effect in innovation, giving businesses an opportunity to outpace competitors and move faster in this economy. As we have seen from our work with StreetBees, R&D support is especially valuable for early-stage companies looking to reinvest directly into innovation while maintaining control over their growth trajectory.
Related: The Northern Star: How Innovation Districts Can Supercharge UK Startups