When it comes to claiming R&D tax credits, one of the most common and costly mistakes businesses make is confusing commercial innovation with technological innovation. This misunderstanding can lead to HMRC enquiries, delays or even outright rejection of claims; even when legitimate R&D activity has taken place.

In this article, we’ll break down the difference between commercial and technological innovation, explain where claimants often go wrong and offer clear advice on how to structure the information on your Additional Information Form (AIF) correctly.
‍
‍

Understanding the Difference between Commercial and Technological Innovation

Commercial Innovation refers to the introduction of a new product, service or process that is novel to your market or business. This might include:

• A new app with a slick user interface
• A ground-breaking business model
• An improved customer journey
• A disruptive pricing structure or branding concept

While these can be game-changers commercially, they are not what HMRC is looking for when assessing R&D tax credit eligibility.

Technological Innovation, on the other hand, involves resolving scientific or technological uncertainties in order to make an appreciable improvement in technology. This might involve:

• Designing a software integration layer that allows incompatible systems to  communicate securely and efficiently
• Creating a new material with unique properties
• Scaling a manufacturing process that has never been done before, and therefore has no blueprint to follow
• Modifying an existing chemical process to improve yield or reduce environmental  impact without known solutions

It is all about solving problems where competent professionals within your industry cannot easily find a solution using publicly available knowledge.

‍

Where can claimants go wrong?

Many businesses instinctively focus their R&D claims on the outward-facing benefits of a project … what it does for users or the market. They highlight commercial achievements like improved customer experience, market disruption or operational efficiency.

This is a critical mistake.

Even if the project involved genuine technological breakthroughs, placing too much emphasis on commercial outcomes in the AIF can trigger red flags for HMRC. They may assume the claim lacks the required technological basis, leading to:

• Requests for additional information
• Formal enquiries into the claim
• Significant delays
• Risk of reduced or rejected claims

A strong R&D claim can be undermined by a poorly worded narrative.

‍

Strengthen your claim: Get qualified support

The strongest R&D tax credit claims are those that clearly explain the technological challenges faced and how they were overcome. To do this effectively, it’s essential to work with professionals who understand not just the science or technology, but also how HMRC defines and assesses qualifying R&D. That means aligning your claim with the CIRD guidance and the Guidelines for Compliance (GfC3).

At InnoClaim, we combine technical insight with specialist tax knowledge to ensure every submission:

• Clearly identifies and explains qualifying R&D activity
• Demonstrates technological uncertainty and attempted advances
• Meets the evidentiary standards required by HMRC

If you're unsure whether your project qualifies, or if your last claim was challenged, get in touch with the team.

‍

‍

‍