The Government is considering significant changes to how companies apply for research and development (R&D) tax relief, with a new consultation launched on the use of advance assurances.
Currently, companies can voluntarily apply for advance assurance from HMRC to clarify whether their R&D activities qualify. However, HMRC argues that the current system doesn’t do enough to reduce error and fraud. The preferred option is a move towards mandatory assurance, particularly for sectors where non-compliance is high.
A new three-stage framework has been proposed:
- Pre-activity: Before research begins or shortly after it starts
- Pre-claim: Once activity is underway but before a claim is submitted
- Pre-payment: After submission but before credits are paid
These changes would allow companies to gain earlier certainty and avoid costly disputes later. HMRC believes that pre-payment checks – rather than the current post-payment enquiries – would reduce the need for claims to be challenged or reversed later, as seen in the recent Collins Construction case.
The Government acknowledges that a mandatory system will increase the burden on businesses, requiring more upfront disclosure and preparation. However, it argues this approach is necessary to deter poor behaviour and ensure genuine claims.
The consultation has 30 questions and will be open until 26 May 2025. No policy changes are expected before the Budget later this year.
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