Understanding Research and Development Tax Relief Advance Assurance
Advance Assurance is a voluntary scheme offered by HM Revenue & Customs (HMRC). It allows eligible businesses to confirm their R&D activities qualify for tax relief before submitting their claims. Once granted, Advance Assurance ensures that HMRC will accept the business’s first three R&D tax relief claims, provided there are no significant changes to the business’s R&D activities.
The UK government’s Research and Development (R&D) Tax Relief Advance Assurance is a program designed to help businesses ensure their eligibility for R&D tax relief. This initiative provides certainty to small and medium-sized enterprises (SMEs) regarding their claims for R&D tax relief. Here’s everything you need to know about Advance Assurance and how it works.
What Is Advance Assurance?
Advance Assurance is a voluntary scheme offered by HM Revenue & Customs (HMRC). It allows eligible businesses to confirm their R&D activities qualify for tax relief before submitting their claims. Once granted, Advance Assurance ensures that HMRC will accept the business’s first three R&D tax relief claims, provided there are no significant changes to the business’s R&D activities.
Why Apply for Advance Assurance?
Applying for Advance Assurance has several benefits:
Certainty: Businesses can claim R&D tax relief with confidence, knowing that HMRC has already reviewed and approved their activities.
Simplified Process: Approved businesses can avoid extensive scrutiny for their first three claims.
Cost-Effectiveness: Advance Assurance reduces the risk of rejected claims, saving time and resources.
Improved Planning: Businesses can better plan their R&D projects with assured financial relief.
Who Can Apply?
Advance Assurance is available to:
Small and Medium-Sized Enterprises (SMEs): Businesses with fewer than 500 employees and a turnover of less than £100 million (or a balance sheet total of less than £86 million).
New Companies: Startups planning to undertake R&D activities.
First-Time Claimants: Businesses that have never claimed R&D tax relief before.
How to Apply for Advance Assurance
Prepare Your Application: Include a detailed description of your R&D activities. Outline your project’s purpose, scientific or technological uncertainties, and the approach to resolving these.
Submit to HMRC: Apply online or via post using HMRC’s Advance Assurance form.
Engage with HMRC: HMRC may contact you for additional information or clarification.
Receive Confirmation: Once approved, HMRC will issue a letter confirming Advance Assurance status.
Key Considerations
Scope of Approval: Advance Assurance covers R&D activities that meet HMRC’s criteria. It does not guarantee approval of unrelated claims.
Changes in Activities: Significant changes in the nature of R&D activities may require additional review by HMRC.
Common Mistakes to Avoid
Insufficient Documentation: Ensure your application provides a comprehensive description of your R&D activities.
Failure to Align with Guidelines: Review HMRC’s R&D tax relief guidelines carefully to ensure compliance.
Neglecting Updates: Inform HMRC of any significant changes to your R&D activities.
Contact us for a free consultation and we will assess your eligibility.