Advance Assurance Scheme

The Advance Assurance Scheme is an optional program offered by HMRC that provides additional assurance for companies making R&D tax relief claims under the SME or RDEC schemes. Under the scheme, HMRC agrees to allow a company’s R&D claim for the first three accounting periods without further verification, giving companies confidence that their claim will be accepted.

The Advance Assurance Scheme was introduced in November 2015 to provide greater certainty for companies claiming R&D tax relief for the first time. Obtaining Advance Assurance provides peace of mind that HMRC will honour the R&D tax relief claim without further queries or needing additional supporting evidence.

Eligibility: Any company planning to claim R&D tax relief can apply for Advance Assurance. This includes:

• Companies claiming for the first time
• Companies that have not claimed R&D tax relief before
• Companies that have claimed R&D tax relief previously but not in recent accounting periods

The key requirement is that Advance Assurance must be applied before submitting the first claim for a period in which R&D tax relief has not been claimed.

Once Advance Assurance is obtained, the initial claims process is simplified because HMRC already has prior confidence in the company’s eligibility and will not investigate the claims further.

Application Process: Applying for Advance Assurance involves completing an application form and providing details on the following:

• Company information
• Summary of R&D activities
• Description of the technological uncertainties involved
• Details on how and when the uncertainties will be resolved

The application requires identifying the specific technological advances sought and uncertainties faced in the company’s R&D work. Supporting documentation can be included to provide additional context.

The HMRC specialist R&D team reviews the application and will evaluate the eligibility of the described R&D activities. The HMRC team may request a meeting or additional information to complete the assessment.

If the R&D activities are deemed eligible, HMRC will issue a letter confirming Advance Assurance has been obtained, usually within 30 working days of receiving the application.

Accounting Periods Covered: Once Advance Assurance is granted, a company can claim R&D tax relief with certainty for the first three accounting periods in which a claim is made. HMRC will accept any claims submitted during this period without further verification or investigation.

The accounting periods do not need to be consecutive. The eligible period rolls forward if a company does not claim in one period. The three-period time frame restarts only if Advance Assurance lapses (see below).

The Advance Assurance scheme provides benefits to companies for their initial claims. After the covered periods, future R&D claims will undergo HMRC’s standard assessment procedures.

Lapsing of Advance Assurance: Advance Assurance will lapse and no longer apply if:

• The company fails to claim in the first three eligible accounting periods
• The company undergoes a takeover or merger
• There is a major change in the company’s circumstances

Once Advance Assurance lapses, the three-period cycle restarts. The company can re-apply for Advance Assurance for future periods if needed.

Benefits of the Advance Assurance Scheme: The key benefits of obtaining Advance Assurance include the following:

• Reduced Risk – HMRC agrees to allow the company’s R&D claim upfront, providing certainty that the claim will be accepted.
• Smoother Claims Process – Removes the need to provide substantial supporting evidence for initial claims.

Faster Processing: HMRC aims to process Advance Assurance claims within 28 days of receiving them.

Expert Review: Obtain feedback from HMRC R&D specialists on whether projects qualify.

Greater Confidence: Provides reassurance for companies new to the R&D tax relief process.

No Obligation to Apply: While the Advance Assurance Scheme provides advantages, companies are not obligated to apply for it when making a first R&D tax relief claim. Companies can submit an initial claim without Advance Assurance, though the claim may undergo more extensive review by HMRC before approval.

The Advance Assurance Scheme is an optional pathway for simplifying and expediting the initial R&D tax relief claims process. Obtaining Advance Assurance gives companies added confidence that HMRC will honour their R&D tax relief claims without issue for the first three accounting periods.

For tax advice or compliance, please contact Tax Accountant at 0800 135 7323 or email info@taxaccountant.co.uk for expert advice.