Advanced Assurance – Simplified R&D Tax Relief

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“Advanced Assurance is approval from HMRC that an investment in your company is likely to qualify for tax relief. Advanced Assurance does not guarantee that your investment will meet the conditions, but you can use it to attract investors by showing investors your proposed investment is likely to qualify”

(SeedLegals, 2018)

Only small businesses are eligible for Advanced Assurance, which is offered to first-time R&D tax credit applications with a revenue of less than £2 million and fewer than 50 employees. 

The goal of Advanced Assurance, which was launched in November 2015, is to educate first-time applicants through the application process and, for those who are successful, provide clarity regarding their claims, therefore allowing them to obtain money more easily. 

HMRC is launching a multi-standard campaign to promote the adoption of Advanced Assurance because they are concerned there is a general lack of awareness of the relief available among a wide number of SMEs. 

How to apply for Advanced Assurance: 

Step 1: Completion of an online form requesting company information as well as specific information on the company’s R&D efforts

Step 2: A phone call with the HMRC specialist assigned to your case (an R&D specialist), and your R&D adviser – this is to ensure the HMRC specialist is satisfied that the claimant company understands the legislation and guidance, and can correctly identify and describe their R&D in this context

Step 3: Following on from this, any missing information must be provided for the HMRC professional to make their judgement

Step 4: HMRC will send a letter stating whether or not Advanced Assurance will be granted to you 

If Advanced Assurance is granted, HMRC will not investigate the R&D claim for the first three accounting periods after the claim is made, as long as no major modifications to the projects or expenses are made as negotiated through the Advanced Assurance procedure. 

Considering other options:

  • Advanced Assurance is an optional process, and businesses can choose to file their R&D tax relief requested traditionally without seeking pre-approval
  • One disadvantage of the Advanced Assurance process: it assumes the application is made during the accounting period, which can be an issue if first-time claimants are unaware of R&D tax relief or do not believe they apply to them until after the accounting period has ended and the accounts and tax computation are being prepared – this could mean the timing is against you and you must file a claim 
  • You also want to avoid inviting a comprehensive investigation of their claim at such an early stage, when the project and/or costs are expected to alter dramatically during the next 3 years, reducing the benefit of advanced certainty

See the link here to apply for your Advanced Assurance with HMRC today: https://www.gov.uk/guidance/venture-capital-schemes-apply-for-advance-assurance