Consultation on R&D Tax Relief Advance Clearances

Consultation on R&D Tax Relief Advance Clearances

Following the Spring Statement delivered by the Chancellor of Exchequer, the UK government has launched a consultation on the introduction of advance clearances for Research and Development (R&D) tax reliefs. The concept of such advance clearances was raised in the ‘Corporate Tax Roadmap’ published as part of last autumn’s Budget alongside the establishment of an R&D expert advisory panel.

Objectives and Current System

The primary objectives of the new advance clearances are the further reduction of error and fraud, but more importantly, providing greater certainty to businesses where the reliability of this integral funding has been in doubt over the past few years. Currently, businesses submit their R&D tax relief claims via an additional information form prior to the claim submission with the claim itself included within their corporation tax return. HMRC then conducts risk assessments and compliance checks to ensure the validity of these claims. This can include enquiries and rejection of claims after they have issued a credit or repayment thus causing uncertainty in the system.

Advance Assurance

The existing system does include a voluntary advance assurance service for small companies making their first R&D tax relief claim. However, this service has seen low uptake, with only around 80 applications in the 2023-2024 period. The government is now exploring ways to enhance this service and make it more effective.

Proposed Changes

The consultation document outlines several proposed changes to the current system:

1. Voluntary Assurances: These would be targeted at growing and high-potential companies, providing them with the certainty they need to invest in R&D activities
2. Mandatory Assurances: These would focus on high-risk sectors to reduce non-compliance and ensure that claims are legitimate
3. Pre-activity, Pre-claim, and Pre-payment Assurances: These different stages of assurance would offer businesses certainty at various points in the R&D process, from planning to claiming and receiving payments

Interested parties are encouraged to submit their responses by 26 May 2025. The government will review the feedback and announce its preferred approach later in the year.

Sam Swansborough, R&D Tax Director, commented: “The proposed advance clearances could greatly enhance the certainty and efficiency of the R&D tax relief process. By participating in this consultation, businesses can ensure that their needs and concerns are addressed, leading to a more robust and supportive system. It's crucial for businesses to engage actively and provide detailed feedback to help the government improve a system that truly benefits the innovation landscape in the UK.”

If you wish to discuss this article in further detail, please get in touch with our Business Tax team here.