Why record keeping is important for maximising R&D tax credit claim

Keeping strong HMRC R&D records is the difference between a smooth claim and a stressful enquiry. Record-keeping for R&D tax credits shows HMRC your claim is legitimate, shortens claim processing time, and helps you identify every qualifying cost.

Learn how to avoid R&D enquiries by keeping contemporaneous records.

Do you have to keep R&D records?

Your R&D records don’t need to be perfect, but they do need to reasonably prove your R&D eligibility to HMRC. Make sure your Corporation Tax records support any figures you enter. Poor records increase the risk of reductions or rejected claims.

What R&D records should you keep?

When record-keeping for R&D tax credits, aim to link qualifying activities to eligible costs with clear, dated evidence. Useful R&D record-keeping examples include: project logs, staff timesheets, subcontractor contracts and statements of work, technical notes, test results, design iterations, and cost breakdowns tied to those activities.

What’s HMRC’s ‘recommended approach’ to R&D record-keeping?

HMRC doesn’t have an official format for R&D record-keeping, but they recommend documenting contemporaneous HMRC R&D records. It’s not necessary to create records just for the claim, or waste money documenting. Your records should help you identify qualifying activities and costs, and ensure accuracy.

HMRC’s GfC3 requirements for R&D tax credits

HMRC’s 2023 Guidance for Compliance provides an outline for tax credits. The guidelines on R&D record-keeping recommend keeping proportionate written records that identify qualifying projects and costs. Good records help you claim correctly and answer HMRC queries.

Record-keeping for R&D tax credits involves documenting claim methodology, sampling, and how estimates were calculated with evidence. Use existing business records where possible – costly systems are unnecessary. 

Why don’t old R&D record-keeping systems meet AIF standards?

Since August 2023, you now have to submit an Additional Information Form (AIF) with every claim. The roll-out of the merged scheme and more compliance staff has also raised standards. Vague details or legacy processes in your record-keeping for R&D tax credits that don’t link costs to evidence can be flagged ‘high risk’.

How do I design an R&D record-keeping framework that holds up to current standards?

Keeping track of data in real-time facilitates more accurate R&D records. Come up with a process your teams can follow using their everyday tools. Reviewing it quarterly to future-proof it can stop data gaps from affecting the whole accounting period.

Remote working can mean that collaborating together to create R&D records can be challenging, so it’s important to have a good documenting system in place.

R&D record-keeping examples:

Sync your R&D record-keeping with project management tools like Jira, Trello and Asana

Map epics and tickets to R&D projects, tagging qualifying tasks and outcomes. When record-keeping for R&D tax credits, capture links to commits, attachments, screenshots, and sprint notes to create an evidence chain from activity to cost.

Create a technical narrative journal

Maintain a short weekly journal explaining the uncertainty, approach taken, experiments run, and results. Include a summary, project objectives and benefits to your industry to ensure your AIF technical narrative shows progression from problem to advance.

Use staff time-tracking protocols like estimates and audit-proof apportionment

HMRC does not mandate timesheets, but expects reasonable, evidence-based apportionment. Agree simple rules for time entries, use lightweight apps or spreadsheets, and keep approvals so you can justify allocations.

Documenting R&D costs by category (with proof requirements)

 

Subcontractors and EPWs: contracts, invoices, and work justification

Keep signed contracts, statements of work, invoices, and evidence that tasks were directly part of R&D. HMRC increased scrutiny for subcontractors and EPWs, so link deliverables to your project logs so cost lines are clearly justified.

Consumables, materials and utilities: logs, cost attribution, and purpose

Record what was used, when, and for which test or iteration, with scrap records where relevant. Tie usage to experiment IDs to support the calculation and avoid blanket percentages.

Software and cloud services: usage logs, licensing, and attribution

Keep licence details, usage logs, and internal cost codes to show how cloud and software spend supported qualifying activities. Store receipts and itemised bills, and annotate allocations where services are shared across R&D and BAU.

What are sector-specific R&D record-keeping protocols?

Sector-specific R&D record-keeping examples:

Software and SaaS companies: Git logs, issue tracking, agile artefacts

When record-keeping for R&D tax credits, link commits, pull requests, code reviews, and issue IDs to experiments and defects that evidenced technical uncertainty. Attach test outputs and release notes to close the loop from hypothesis to measurable result.

Engineering and manufacturing: CAD files, prototypes, test reports

Version CAD files, store BOM changes, and record test rig data and certification attempts. Photograph your prototypes as they progress and keep analyses of your failed attempts to show why further iterations were required.

Biotech and pharma: lab notebooks, clinical trials, regulatory logs

When record-keeping for R&D tax credits, maintain dated lab notebooks with protocols, deviations, and results, and preserve regulatory correspondence and approvals. Index datasets to experiments so analyses can be reproduced during an enquiry. 

Keeping R&D Records – Checklist

How to avoid R&D enquiries with records:

• Check your project activities are documented
• Link your costs to your activities
• Track staff time
• Save your subcontractor agreements
• Store and date evidence

Keeping R&D Records – FAQs

 

What is a contemporaneous record for R&D tax credits?

HMRC’s best practices for R&D record-keeping recommend you evidence as you work, keeping tickets, lab notes, or test outputs, rather than reconstructions after year-end. HMRC’s R&D records guidance encourages R&D records that stand up to review. 

Does HMRC require timesheets for R&D tax claims?

No, timesheets are not mandatory when record-keeping for R&D tax credits, but HMRC expects reasonable, supportable apportionment of staff effort and will consider timesheets where available. Keep evidence that demonstrates who did what and when.

How long should you hold onto R&D records?

HMRC recommends keeping R&D records for at least six years after the end of the accounting period. Store personal data securely in line with GDPR laws and your document retention policy. Back up your data and store it in the cloud.

Can I use Jira or Trello for R&D record keeping?

Yes. HMRC does not prescribe tools for record-keeping for R&D tax credits, records just need to offer reliable, and ideally contemporaneous records. So mainstream project systems are fine if used consistently. Tag qualifying tickets and link them to costs.

What are the four best practices for R&D record-keeping?

Record in real time, link activities to costs, date and attribute evidence to people, and store securely for six years. Following these best practices for R&D record-keeping rules reduces enquiry risk.

How should R&D costs be recorded?

Track costs in your accounts as normal when record-keeping for R&D tax credits, then map them to projects with clear attribution notes and supporting documents. If your systems do not track by project, HMRC expects you to identify qualifying spend from general ledgers with evidence.

What if my subcontractor will not give detailed HMRC R&D records?

Keep your contract, scope, invoices, and any deliverables, and document how their work fed into your technical aims. Note any gaps and substitute other contemporary evidence to show direct R&D contribution.

What if I have no records?

HMRC officers are flexible in deciding which HMRC R&D records are necessary to approve a claim. Records can help you avoid R&D enquiries, but you can still claim even if you have none.

How can Alexander Clifford help?

Alexander Clifford have helped hundreds of businesses make no-win, no-fee claims that capture every qualifying activity and cost. We can help you ensure you have all of the records you need for a smooth, compliant claim.

Book a free consultation for more information about the best practices for R&D record-keeping, and find out how we can boost your tax credits payout.