How do R&D tax reliefs preserve the confidentiality of innovation?

For accountants looking to help clients with R&D, they might find themselves being asked about the extent to which details of an innovation must be disclosed.

Some innovative businesses will likely know the need to provide a technical narrative with an R&D tax relief claim that details the trial and error paving the way to an eventual advance.

Knowing how sensitive information is protected during an R&D tax relief claim is essential for accountants who wish to effectively support their clients.

Do R&D tax relief claims present a risk to a Non-Disclosure Agreement?

When dealing with some of the most cutting-edge businesses in the country, it is likely that there will be elements of the work conducted that are covered by a Non-Disclosure Agreement (NDA).

There could be reasonable objections to providing the extent of information that is believed to be necessary to provide an effective technical narrative to support an R&D tax relief claim, while disclosing associated costs may also make some clients uncomfortable.

However, the conversation around numbers is likely one that accountants are more familiar with and comfortable having, as there should already be measures in place to protect the confidentiality of clients’ accounts.

The same measures will extend to the compilation of costs for an R&D tax relief claim, though an additional level of inquisition may be required to validate that the costs do arise from qualifying expenditure.

Theoretically, the technical narrative could contain enough information for a rival business to deduce what the work entailed and replicate the advance with little issue.

Many R&D projects do not become public knowledge and certainly the steps taken to achieve them are generally kept hidden.

Concerns may be further compounded by businesses that conduct work under an NDA themselves, such as those who may be providing assistance to the Ministry of Defence.

It should come as a relief to accountants and innovative businesses that it is entirely possible to preserve the confidentiality of research while making an R&D tax relief claim.

How can confidentiality be protected when an R&D tax relief claim is being made?

The first thing to note is that R&D tax relief claims are focused on a company’s work to advance the field of science or technology and have little concern for the end user, unless that is a core part of the research.

This means that most NDAs should be preserved by default, as it may be that the company itself does not fully understand the ramifications of the research, particularly in cases where the work is conducted on behalf of an organisation like the Ministry of Defence.

More significantly, HMRC is bound to protect the confidentiality of any information that is submitted to it.

Where there is a request to access original or sensitive materials that could pose a risk to confidentiality, it should be possible to propose controlled access instead of outright refusing.

However, the real threat to confidentiality in an R&D tax relief claim comes in the form of using generic AI systems of Large Language Models (LLMs) to assist with making a claim.

Data inputted into these systems is not secure and can be used to train future iterations of the AI model.

It has also been possible to reverse engineer prompts and thus obtain information submitted by another user, potentially revealing confidential information to anyone else using the system.

These concerns are why we reported on the issue surrounding HMRC’s use of AI when assessing R&D tax relief claims as the details were emerging.

The best reassurance you can give to your clients regarding their confidential work is that no element of it will be exposed to an LLM or generic AI.

Instead of risking client confidentiality, seeking advice from an expert R&D tax consultant can allow you to get the information you need while keeping trade secrets safe.

Our team can assist with all aspects of an R&D tax relief claim, including an enquiry should one arise, while adhering to any and all confidentiality concerns that a client may have.

Become more confident in helping clients with R&D by getting in touch with our team.

Adam Bointon

Adam Bointon is a Technical Director specialising in R&D Tax Credits for SMEs in manufacturing and software sectors. With over 15 years’ experience, he works closely with businesses to identify qualifying R&D activities and prepare clear, compliant claims. He combines technical expertise with a strong understanding of economics and finance to support successful outcomes. Adam also contributes to industry webinars and CPD sessions, sharing insights on R&D tax relief and HMRC requirements.