Advance Assurance - R&D Tax Credits

Shorts’ Innovation Taxes Group can offer professional help to eligible companies to enable them to determine whether Advance Assurance is suitable for their R&D tax credits claim and guide them through the process. HMRC introduced the process to encourage the smallest companies to make R&D tax credits claims and to help first time claimants navigate the system. Not all companies are eligible and it is a voluntary process, so not all companies who are eligible will go down this route.

Successful applicants for Advance Assurance receive a guarantee from HMRC that their claims for R&D tax credit reliefs won’t be enquired into for the first three accounting periods in which they are made, provided the R&D project and costs reflect those agreed in the Advance Assurance process.

HMRC hope this will enable companies to then concentrate on running the business without further worries as to eligibility. It is also hoped that the proof the company will benefit from R&D tax credits may help the claimant access other forms of funding. A further benefit to HMRC is that by involving the company in detailed discussions with HMRC specialist at an early stage they can ensure claimants are better educated in terms of the scheme rules.

The process

Eligible companies are those who have not previously applied for R&D tax credits (and, for companies in a group situation, where no other company in the group has previously applied) and who have a turnover of less than £2m and less than 50 employees.

The first stage is to complete an on-line form setting out information regarding the company and providing details of the R&D activities. It’s then necessary to set out the scientific or technological advance sought, the uncertainties in the project, how the project plans to resolve the uncertainties and why the knowledge sought is not readily deducible. A breakdown of the expected costs is also required.
Following receipt of the form HMRC will appoint a specialist case worker who will review the information provided and arrange a telephone call with the company, and their R&D adviser if they have one. The caseworker will want to speak to the person or people at the company who are mostly closely involved in the R&D and will want to be satisfied that those individuals are aware of the legislation and guidance on what is a qualifying R&D project and how to apply that to their individual circumstances.
Following the call, the caseworker may require further information and, in particularly complex cases, may wish to visit the company.
Once the case worker has had sufficient information to enable them to conclude that whether the company activities are within the rules of the scheme, and that the relevant individuals in the company know how to apply the rules to their circumstances, HMRC will write to the company setting out the decision and explaining the company’s responsibilities where Advance Assurance is given, and setting out the reasons why approval hasn’t been obtained where this is the case.
If approval is given, the actual position must be monitored in line with that set out in the Advance Assurance and any significant changes discussed with the case worker to determine whether the Assurance still applies. It’s advisable to submit a report in support of the claims even if Advance Assurance is confirmed to apply.

Here to help

Advance Assurance can undoubtedly provide certainty for first time claimants of R&D tax credits but it is itself a detailed process which requires an in-depth knowledge of the legislation and guidance as it applies to R&D tax credits and so it may not be suitable for many eligible companies. In particular the completion of the form and the preparation for the telephone conversation with the case worker will require specialized knowledge. Shorts’ Innovation Taxes group have experience of helping clients decide whether to apply for Advance Assurance, and helping clients through the process where they decide to apply – it may be they decided it’s not suitable.

Our experienced team can guide you through each stage of the process, helping to explain the R&D guidance in the context of the activities carried out by your company, work with you to complete the form, help you to prepare for and join the call with the caseworker and deal with any follow up queries.

If you are interested in discussing whether Advance Assurance might benefit you company, please contact a member of the team, or complete our form to arrange your free consultation.