R&D clearances – changes ahead?
Research and development (R&D) tax reliefs are very valuable; however, HMRC has increased compliance requirements in this area significantly in the recent past. Further changes seem to be on the way, as in March 2025, the government published a consultation on new procedures for companies to receive advance assurance (i.e. agreement, in advance of a project being undertaken or a claim being made, that the work appears to be ‘qualifying’ R&D).
Advance assurance is restricted to smaller companies that are claiming R&D tax relief for the first time. There were only 80 applications received (out of a possible 11,500) in 2023/24.
The current process
A company planning to conduct R&D can apply to HMRC for advance assurance that it will qualify for R&D tax relief for that project. If it agrees that tax relief is due, HMRC will accept the company’s claims for that project for up to three accounting periods, provided the activity remains in line with what was discussed and agreed in the application.
Possible changes
The aim of the consultation was to explore how alternative advance clearance procedures could be designed, with the objectives of:
- reducing errors and fraud; and
- giving companies greater certainty in relation to R&D tax relief.
The government believes that there are three stages at which a form of assurance may be useful:
- when research activity has not started or has only recently begun (‘pre-activity’);
- when activity is well underway but before a claim is made (‘pre-claim’); and
- when a claim has been made but before the relief is paid (‘pre-payment’).
It is also considering the possibility of:
- charging for voluntary clearances;
- mandating the use of advance assurance in some circumstances; and
- re-introducing a minimum expenditure threshold for R&D tax relief generally.
If your company is involved in R&D, you don’t want to miss out on valuable tax relief but, equally, you don’t want to end up with penalties (and no tax relief) if you get things wrong. We are here to help you navigate this compliance minefield should you need assistance in this area.