5 Common Mistakes in R&D Tax Credit Claims

Filing an R&D tax credit claim in New Zealand isn't overly complicated, but there are several common mistakes that can reduce your benefit, delay your claim, or trigger a review from Inland Revenue. Here are the five most frequent errors we see — and how to avoid them.

1. Confusing Innovation with R&D

This is the most fundamental mistake. Not all innovation qualifies as R&D for tax purposes.

The RDTI has a specific definition of R&D: it must involve resolving scientific or technological uncertainty through systematic investigation. The key question is whether a competent professional in the field could determine the outcome in advance using existing knowledge.

What counts:

"We don't know if our new algorithm can process real-time data at the scale we need" — this is technological uncertainty
"We're experimenting with a novel composite material and don't know if it will withstand the required stress loads" — this is scientific uncertainty

What doesn't count:

"We're building a mobile app using React Native" — this is routine development using known technologies
"We're implementing a new CRM system" — this is system integration, not R&D
"We designed a new logo and brand identity" — this is creative design, not scientific investigation

If you claim activities that don't meet the uncertainty test, your entire claim credibility is undermined. Be selective and honest about what qualifies.

2. Poor Time Records for Staff Costs

Staff costs typically make up 60-80% of an R&D claim. Yet many businesses can't demonstrate how they calculated the R&D percentage for each employee.

The problem: Claiming that "Sarah spends about 70% of her time on R&D" without any supporting evidence. If IR asks how you arrived at that figure and you can't explain it, your claim is at risk.

The fix: You don't necessarily need detailed timesheets for every hour. But you do need a defensible basis for your R&D time allocations. This could be:

Project management tools (Jira, Linear, Asana) showing task allocation
Sprint planning records showing R&D vs non-R&D work
Calendar analysis showing time spent in R&D-related meetings
A documented methodology for estimating R&D time, applied consistently

The key is consistency and documentation. Pick a method, document it, and apply it uniformly across your team.

3. Not Claiming Eligible Support Activities

Many businesses only claim their core R&D activities and miss the support activities that also qualify.

Under the RDTI, support activities that are directly related to a core R&D activity can also be claimed. These include:

Data collection and analysis to support R&D decisions
Testing and quality assurance of R&D outputs
Training staff on new techniques required for R&D
Mathematical analysis and statistical modelling
IT support specifically for R&D infrastructure
Project management of R&D activities

A software company might correctly claim developer time writing experimental code but miss the time spent by:

QA engineers testing experimental features
DevOps staff setting up specialised R&D environments
Product managers researching and defining technical requirements
Data analysts evaluating R&D outcomes

Review your support activities carefully. They can meaningfully increase your claim without stretching eligibility boundaries.

4. Applying for General Approval Too Late

The RDTI requires General Approval from Callaghan Innovation before you can claim the credit. While retrospective applications are allowed, many businesses leave this too late and run into problems.

Common scenarios:

Filing the Supplementary Return before General Approval is granted, causing processing delays
Describing R&D activities poorly in the General Approval application because it's done hastily at year-end
Missing the opportunity to adjust R&D plans based on feedback from Callaghan Innovation

Best practice: Apply for General Approval as early as possible in the tax year. This gives you:

Certainty about which activities qualify before you file
Time to respond to any questions or requests for clarification
The ability to adjust your R&D programme if needed
Confidence in your year-end expenditure calculations

5. Missing the Interaction Between RDTI and RDLTC

As covered in our comparison guide, the RDTI and RDLTC can be claimed together — but many businesses either don't know this or get the interaction wrong.

Common mistakes:

Claiming only the RDTI when the RDLTC would deliver a larger benefit (28% vs 15%)
Not claiming the RDTI on R&D expenditure that exceeds the RDLTC base amount
Double-counting the same expenditure under both schemes
Assuming you can only claim one scheme per year

The optimal approach: If you're in a tax loss position, calculate your RDLTC benefit first (28% of the lesser of R&D spend and tax loss). Then check whether you have additional R&D expenditure beyond the RDLTC base that could qualify for the RDTI at 15%.

This combined approach can significantly increase your total benefit compared to claiming either scheme alone.

How to Get It Right

The best way to avoid these mistakes is to:

Start with clear R&D activity descriptions that demonstrate genuine uncertainty
Maintain consistent time records throughout the year, not just at filing time
Review support activities alongside core R&D to capture the full scope
Apply for General Approval early in the tax year
Model both RDTI and RDLTC to find the optimal claiming strategy

At Get Tax Credits, our AI-powered platform helps you navigate these complexities, from identifying eligible activities to calculating the optimal combination of RDTI and RDLTC claims.