Is AI helping or hindering R&D tax credits?

Date:
Tue, 14 Apr 2026 09:27:17 +0000

Description:
AI is shaping how businesses grow and innovate.

FULL STORY ======================================================================Copy link Facebook X Whatsapp Reddit Pinterest Flipboard Threads Email Share this article 0 Join the conversation Follow us Add us as a preferred source on Google Newsletter Tech Radar Pro Are you a pro? Subscribe to our newsletter Sign up to the TechRadar Pro newsletter to get all the top news, opinion, features and guidance your business needs to succeed! Become a Member in Seconds Unlock instant access to exclusive member features. Contact me with news and offers from other Future brands Receive email from us on behalf of our trusted partners or sponsors By submitting your information you agree to the Terms & Conditions and Privacy Policy and are aged 16 or over. You are
now subscribed Your newsletter sign-up was successful Join the club Get full access to premium articles, exclusive features and a growing list of member rewards. Explore An account already exists for this email address, please log in. Subscribe to our newsletter The Bloomberg Tax analysis on whether soaring tech salaries qualify for R&D tax credits raises an interesting question.

As AI drives remuneration for engineers into the millions, tax authorities
are questioning whether those individuals were genuinely conducting
qualifying research as opposed to dedicating most of their time to strategy, management and external commitments. Theres an undeniable tension growing between how AI is actively accelerating innovation in practice, and how that same innovation is currently interpreted by HMRC for tax purposes. If AI is doing more of the work, what exactly counts as R&D? Article continues below You may like Cracking the AI code: realizing AI's true value in finance Experts warn UK firms want to keep spending on AI - even without clear ROI
Why AIs investment must materialize for the C-Suite Robert Whiteside Social Links Navigation

CEO of EmpowerRD. We find ourselves at the intersection of two realities pulling in opposite directions. On one side, AI is genuinely accelerating innovation by compressing development cycles, unlocking new capabilities and helping ambitious businesses move faster than was previously considered possible.

But across the way, HMRCs definition of qualifying R&D was not written in the knowledge of what AIs capabilities would ultimately become.

But here we are, and the gap between how innovation is unfolding in practice and how it is being interpreted for tax purposes is widening. Theres a real financial risk involved, so how can businesses ensure AI continues to help them secure R&D tax credits, rather than slipping into a reality where AI becomes a significant hindrance? The new pace of innovation Innovation is the lifeblood of the UK scale-up scene. Investors increasingly recognize that innovation is the driving force behind business performance, and thats why nine in 10 consider R&D tax relief essential to business success,
particularly for maintaining growth momentum and extending operational
runway. Are you a pro? Subscribe to our newsletter Sign up to the TechRadar Pro newsletter to get all the top news, opinion, features and guidance your business needs to succeed! Contact me with news and offers from other Future brands Receive email from us on behalf of our trusted partners or sponsors By submitting your information you agree to the Terms & Conditions and Privacy Policy and are aged 16 or over.

AI is a significant part of what is driving that investment, as businesses across sectors continue to integrate AI tools into their development processes. These tools are being used to test hypotheses faster, automate complex workflows and push into technical territory that would previously
have required far greater time and resource.

From an innovation standpoint, this is exactly the kind of ambition the R&D relief scheme was introduced to support. The challenge is that the schemes eligibility criteria have not kept pace with how that innovation is now being done. Where AI creates a problem for HMRC claims HMRC defines R&D as activities that seek to resolve scientific or technological uncertainty, so the scheme was designed to reward genuine experimentation. When AI is
deployed to help carry out genuine R&D, such as using it to interpret large data sets or automate processes, no issues arise. What to read next The key
to the UK's AI success lies in closing the skills gap The pilot phase is
over. Heres whats next for enterprise AI automation Before you roll out more AI, answer this: Who's accountable?

Likewise, if a business develops proprietary AI tools to help create logic systems and algorithms from scratch, HMRC also considers R&D.

However, when businesses start using off-the-shelf AI tools or agents,
putting them into their own products and services under the pretense of innovation, it doesnt constitute as R&D and so therefore cannot be claimed against.

Against a backdrop of rising enquiry rates, businesses recognize that HMRC checks are detailed investigations into both the technical and financial aspects of a claim. Those that once filed claims with minimal supporting evidence face greater scrutiny, and blurred lines around AI-assisted innovation is another consideration.

Other businesses are underclaiming or choosing not to claim at all due to
fear of triggering an enquiry, or because of the significant time and effort involved in preparing a robust submission. Both outcomes carry a real cost to the businesses involved and to the wider innovation economy. How R&D relief acts as a growth strategy Founders should continue to treat R&D as a major growth driver. From securing funding to shaping operational priorities, prioritizing R&D is one of the most effective ways for founders to build
trust across the board.

Research found that 97% of UK investors are now actively shaping the R&D strategies of the companies they fund, and investors are becoming
increasingly diligent in looking at how a company prepares its R&D claim, as poor R&D governance can delay growth or destabilize the runway.

The R&D relief scheme remains one of the most valuable tools available to UK innovators, so transparency is critical for qualifying companies.

For businesses working closely with AI, that means documenting everything and building a technically credible claim that reflects the true ambition of what teams are developing, not just the speed at which AI is helping them develop it. We've featured the best IT automation software. This article was produced as part of TechRadarPro's Expert Insights channel where we feature the best and brightest minds in the technology industry today. The views expressed
here are those of the author and are not necessarily those of TechRadarPro or Future plc. If you are interested in contributing find out more here: https://www.techradar.com/news/submit-your-story-to-techradar-pro



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