R&D Advance Assurance from HMRC

Due to the complexity of the rules around R&D reliefs, many companies do not know at the point of making an R&D investment whether HMRC will agree that the activity that is being undertaken is qualifying and if the costs will qualify for R&D relief . This can lead to companies not making an R&D advance assurance claim and losing out on valuable corporation tax relief. Alternatively, it can mean that HMRC may be of the opinion that a claim submitted by a company does not represent R&D activity. As well as tax relief being denied, HMRC may also levy interest and penalty charges on an incorrect claim.

HMRC already offer voluntary advance assurances to businesses to help them have more certainty about whether their claim would be accepted by HMRC. However, HMRC have commented that this service is not commonly used.

In the Spring statement the government announced that it will be consulting on widening the use of ‘advance clearances’ for R&D claims. This is in an attempt to try and reduce errors and fraud and provide more certainty. One aspect being considered is whether to make R&D advance assurances mandatory in certain industry sectors, particularly those where HMRC feels the risk of an incorrect claim is high.

The consultation also considers whether HMRC should re-introduce a minimum expenditure threshold before R&D relief can be claimed. In the past, a £25,000 threshold has been used, which was later reduced to £10,000 before being scrapped altogether.

If you would like to discuss R&D reliefs in more detail, please contact Joe Wilson on 023 8046 1237 or email Joe Wilson.