Advanced Assurance - HMRC’s plan to simplify R&D Tax Relief

14 February 2020 Scott Burkinshaw Radius - R&D Tax Relief & Patent Box, Business Taxes

Advance Assurance is open to first time claimants of R&D tax credits relief, and only the smallest companies are eligible – those with a turnover of less than £2m and less than 50 employees can apply.

Although the latest statistics show an increase in the number of SMEs accessing R&D tax credit reliefs, HMRC are concerned that there remains a general lack of awareness amongst large numbers of SMEs as to the relief available and they are consequently running a multi-stranded programme to increase uptake. One aspect of this is the Advance Assurance process. Launched in November 2015, the aims of Advance Assurance are to guide first time applicants through the application process and, for those who are successful, provide certainty over their claims, potentially enabling them to better access funding.

The process comprises:

  • Completion of an on-line form which requires details of the company and detailed information about the company’s R&D activities
  • A telephone call with the HMRC specialist appointed to your case, an R&D specialist (or the person most closely involved in the R&D project) from your company and your R&D adviser – this is to enable the HMRC specialist to be satisfied that the claimant company understands the legislation and guidance and can correctly identify and describe their R&D in this context
  • Subsequent provision of any outstanding information to enable the HMRC specialist to reach his decision
  • HMRC issuing a letter giving their decision as to whether Advance Assurance is granted or not

If Advance Assurance is granted then HMRC will not enquire into the R&D claim for the first three accounting periods of claiming the relief, provided there are no significant changes to the projects or costs as discussed in the Advance Assurance process.

Advance Assurance is a voluntary process and companies can choose to submit their claims for R&D tax reliefs in the usual way, without obtaining pre-approval. One disadvantage to the process is that it assumes the application is made during the accounting period but in our experience, many companies, especially first-time claimants, don’t know about R&D tax reliefs, or don’t believe they might be applicable to them, until after the period end when the accounts and tax computation are being prepared. Often at this stage, timing works against you and a claim has to be submitted. Another issue which companies may wish to avoid is inviting detailed scrutiny of their claim at such an early stage, when it is likely that the project and/or costs will change significantly within the three year period, thus minimizing the benefit of the advanced certainty.

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