Advance assurance and R&D tax relief: which service is best for you and your clients?

In May, HMRC launched its full pilot of the targeted advance assurance service, which runs until May 2027. Alongside this, HMRC continues to offer full claim advance assurance. Although both services have similar names and purposes, how they work and the companies that can use them differ significantly. In addition, companies can only use one service per claim period.

Given the potential for confusion in this arrangement, here’s our guide to both services and how to choose the best option for your client.

Targeted advance assurance

The targeted advance assurance pilot is aimed at companies who have specific questions about some aspects of their R&D claim. It allows these companies to get feedback from HMRC before submitting their R&D claim. Key points about this service:

• It is only available to SMEs
• It must be used before a claim for R&D tax relief is submitted
• Users can ask for assurance on two of the following four areas:
  • Whether a project meets HMRC’s definition of R&D;
  • Whether overseas expenditure can be included;
  • Whether a company can claim for contracted out R&D, or;
  • Whether a company qualifies for an exemption from the PAYE/NIC cap.

The service is accessed through an online form. HMRC aim to provide their decision in writing within 40 days. Their decision is final and cannot be appealed. However, if advance assurance is not granted, companies are not blocked from submitting a claim for R&D tax relief.

Full claim advance assurance

Full claim advance assurance is aimed at small companies planning to claim R&D tax relief for the first time. Eligible companies can get assurance from HMRC to covers their first three claim periods. Key points about this service:

• It is only available to SMEs that:
  • Have never claimed R&D tax relief before, or, for companies that are part of a group, where no member of the group has claim R&D tax relief, and.;
  • Have fewer than 50 employees and turnover of less than £2 million.
• Applicants are required to have a discussion with HMRC about their R&D projects
• Successful applicants can claim R&D tax relief for three years without further checks, unless their projects change.

The service can be applied for through an online form or via post. HMRC informs companies of their decision in writing. Their decision cannot be appealed, and unsuccessful applicants cannot re-apply for advance assurance. However, these companies are not blocked from making a claim for R&D tax relief through the normal channels.

Which service is best for your client?

Choosing between the services is fairly simple in the vast majority of cases – most companies are ineligible for full claim advance assurance, either through size or having made a previous claim for R&D tax relief. For these companies the only question is which two areas of the claim are they most concerned about.

For first-time claimants, however, a decision does have to be made. Only one service can be used per claim, so once an application is made the company cannot change between services.

Having said that, the decision between the two services really hinges on one point: how certain is the company of the direction of their R&D over the next three years? If they have everything mapped out and are sure they won’t need to deviate or pivot away from their current plans, then full claim advance assurance is ideal. The upfront effort is more, but no additional work is required for three claim periods.

On the on the hand, if a company knows that they will be carrying out R&D but is unsure of the exact direction it will take them in for three years, or is working on something so cutting edge that they can’t predict outcomes, they are better applying for targeted advance assurance on any aspects they are unsure about each year.

If you would like to explore how WhisperClaims supports structured, end-to-end R&D claim delivery within the merged scheme environment, why not get in touch for a chat?

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