R&D tax relief advance clearances
What is advanced assurance and how might it change?
During the 2025 Spring Statement, HMRC released an open consultation seeking responses regarding the potential changes to the UK's Research and Development (R&D) tax relief system. The consultation seeks views on widening the use of advance clearances (currently referred to as “advance assurances”) – to reduce error and fraud, provide certainty to businesses and improve the customer experience.
What is advance assurance?
Advance assurance is currently a voluntary scheme offered by HMRC that allows small and medium-sized enterprises (SMEs) to submit details of their R&D activities before claiming R&D tax relief on their Company Tax Return. If HMRC agrees that the relief applies, the advance assurance agreement guarantees the claim will be accepted, as long as it’s in line with what was agreed in the application. However, it does not constitute a claim itself; and companies must still claim the relief through their tax return.
Who is eligible for advance assurance?
A company can apply for advanced assurance if:
- it is an SME
- it is its first R&D tax relief claim
- it has a turnover below £2 million and less than 50 employees
- it is planning to carry out R&D, or it has carried out R&D but not yet claimed relief
- if it is part of a group, none of the companies linked to it have previously claimed R&D tax relief.
What prompted the consultation?
When the advance assurance scheme was introduced, its main purpose was to provide more certainty to claimants about the validity of their claim. However, there has been minimal uptake of advance assurances with only 80 applications submitted out of 11,500 eligible applicants between 2023 to 2024. The consultation therefore aims to raise awareness of the scheme, and to seek views on the issues encountered by taxpayers. The responses from this consultation will be used to inform HMRC on how an improved process could be designed.
Furthermore, in recent years, HMRC has introduced a number of measures to reduce non-compliance involving R&D tax reliefs. While HMRC has insisted that increased compliance checks were necessary, it has also admitted that this has heightened uncertainty for claimants, and that the added steps and information requirements have raised the costs of making a claim. There is a concern that these changes may discourage companies from making legitimate claims. The consultation outlines a set of proposed changes, which could address the issue of uncertainty for claimants.
What are the proposed changes?
- Introduction of a minimum expenditure threshold (MET) for R&D relief claims, this could reduce smaller claims with higher error and fraud rates, thereby lowering the number of claims and freeing up resources for assurance activities.
- Introducing a pre-activity assurance, which is an informal exchange between the company and HMRC to identify and address uncertainties, aiming to guide the company correctly despite less certainty and detailed evidence compared to later-stage assurances.
- Exploring the options for voluntary and mandatory assurances. The eligibility criteria for assurances are under consideration, focusing on growing and high potential companies and specific sectors, subject to size conditions.
What are the next steps?
The consultation will run from 26 March 2025 to 26 May 2025. You can submit a response to the consultation by submitting this form. Our specialist R&D team want to hear your thoughts on the proposed changes. To start the conversation, please contact Stuart Weekes, or your usual Crowe contact.
