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Tax Talk – Advance Assurance for R&D Tax Relief

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Certain Small & Medium Sized Enterprises (SMEs) can apply for Advance Assurance (AA) in respect of R&D tax relief claims.

It is only available for companies that have never claimed R&D tax relief before, whether or not the projects are underway or about to commence.

By supplying HMRC with some information and applying by way of a form, HMRC will consider the application then, if successful, confirm that the company will not receive any enquiry for three accounting periods.

Information required for the application include:

  • Company accounts
  • Company tax return and HMRC correspondence
  • Company registration documents
  • Project details
  • Contact details for the Competent Professional

As we sit on HMRC’s R&D Consultative Committee we are aware that this system has had a very low take-up. So why is the take-up so low?

Looking at this from Catax’s viewpoint, the information required is similar to making a claim using the normal channels yet probably requires more client input, and it does appear to be an unfair system in that it grants a free run for three years even if after the initial application the “R&D” costs claimed thereafter are based on projects that, in fact, are not R&D. Yet, HMRC could challenge a company also in years two and three of a claim with genuine R&D merely to clarify some points and cost that client money by way of professional fees.

I would envisage that a company wishing to use Advance Assurance will still require assistance from an expert in R&D tax relief to understand the definition of R&D for tax relief purposes. This will come at a cost.

Therefore, we are very proud of Catax’s proposition. We will not use Advance Assurance but, rather, carry out a robust claim, maximising the qualifying costs whilst minimising the risk of an HMRC enquiry. We submit thousands of claims yet only have one ongoing enquiry at present. Should the worst happen, and HMRC challenge our work, our fees cover dealing with this enquiry and as our fees are based on a percentage of the saving, we will pro-rata reimburse any fees paid that relate to any successful HMRC challenge.

We consider this to be a much fairer system for all claimant companies.

By Nigel Holmes, Head of R&D Technical Operations at Catax – enquiries@catax.com

 

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