As innovation becomes the currency of competitiveness, tax relief for research and development (R&D) remains one of the most effective ways to stimulate long-term investment. Yet, as highlighted in EY’s 2024 Global R&D Incentives Guide, rising audit scrutiny, evolving eligibility rules, and inconsistent treatment under international accounting standards are creating significant friction.
This article helps accountants navigate the complexities of R&D tax relief, ensuring their clients can fully benefit from available incentives while remaining compliant.
Understanding R&D Tax Relief in 2025
Many OECD countries have generous innovation tax incentives, yet uptake has become increasingly uneven. The reason? The documentation burden. To qualify for R&D credits, businesses must provide extensive evidence of qualifying activities, expenditures, and outcomes. Countries such as the UK and Canada have recently tightened audit thresholds, while others, including Australia and France, have introduced pre-approval mechanisms that delay filing.
This heightened scrutiny means that accountants are now expected to play a larger advisory role in ensuring that R&D tax relief is claimed accurately and defensibly. Without careful attention to evolving requirements, businesses risk missed opportunities or, worse, costly clawbacks.
What Can Be Claimed Under R&D Credits?
While claimable expenses vary by region, most tax authorities allow relief on:
- Staffing and personnel costs, including salaries and employer contributions.
- Software or tools used specifically for R&D purposes.
- Consumables such as lab materials or test components.
- Subcontractor or consultancy costs, if directly tied to eligible R&D activity.
Some countries now require granular cost-tracking at a project level. Accountants must implement control systems that track eligible spend in real time and allocate costs accurately across financial periods.
Accounting Treatment and Audit Preparation
Whether using IFRS or local GAAP, accountants must reflect R&D credits appropriately within income statements and tax reconciliations. Some jurisdictions permit relief to be recognised as a reduction in corporation tax, while others require it to be treated as government assistance.
The increase in R&D-related audits globally has led to more firms being asked to retrospectively prove claims. Best practice involves detailed supporting documentation — including project logs, time records, and procurement data — to substantiate eligibility.
R&D Tax Relief and Audit Risk
While R&D tax relief continues to offer significant savings, recent global trends suggest a tightening of audit protocols around these claims. In several jurisdictions, including the UK, Australia and parts of the EU, authorities have introduced stricter eligibility checks and greater scrutiny over supporting documentation. As a result, advisory firms must revisit how they assess and record qualifying activities.
A key challenge lies in the shifting definitions of what constitutes genuine R&D. Many governments are narrowing the scope to exclude routine system improvements or off-the-shelf technology adaptation. Accountants must therefore ensure that client claims are not only technically justified but also well-documented. This includes clear explanations of scientific or technological uncertainties, evidence of testing, and appropriate internal governance around claims.
Firms that offer specialist R&D tax support must also consider how to future-proof their methodology. Using a templated approach can lead to inconsistencies or inflated assumptions, which are increasingly flagged during audit cycles. Accountants should instead work closely with technical leads to build a process that can stand up to regulator scrutiny, both in the current financial year and in subsequent audits.
Ultimately, while R&D tax relief remains a valuable incentive, it is no longer a compliance checkbox. It requires strategic input from accounting teams, especially as audit environments become more complex and regulators demand greater substantiation.
Working with INAA to Strengthen R&D Advisory
As global compliance demands intensify, businesses increasingly require support that combines local expertise with an international perspective. INAA member firms offer this dual expertise, helping clients secure R&D tax relief while remaining audit-ready and financially compliant.
Whether your firm is navigating jurisdictional eligibility rules or aiming to expand its innovation advisory services, INAA connects you with the insight and technical rigour needed to lead with confidence.