Instead of requiring assurance over an entire claim, SMEs can now seek HMRC’s view on up to two specific areas of uncertainty within a project before submitting a claim and is a welcome step in providing greater clarity upfront on complex areas.
Businesses can request HMRC’s view on whether:
- A project meets the definition of qualifying R&D
- Overseas expenditure is eligible for relief
- Contracted-out R&D can be claimed
- The company qualifies for exemption from the PAYE/NIC cap
The pilot is open to SMEs that are planning or undertaking R&D, provided they:
- Haven’t yet claimed R&D tax relief for the relevant period
- Haven’t already received assurance on the same areas
- Are not subject to certain compliance exclusions (e.g. open enquiries or avoidance schemes)
Some of the key information needed for the application is:
- An overview of the project
- Details of the competent professional
- Forecasted expenditure
- Project duration
- The types of records held, and
- Why you believe overseas expenditure is eligible
As it is not possible to add attachments to the form companies will need to have all of this information to hand, importantly you cannot save your progress so will need to complete the form in one go. Depending on the area of clearance it may also be necessary to include extracts from contractual arrangements, patent applications or documents supporting management activities as evidence.
HMRC are aiming to process applications within 40 days, subject to all information being accurately provided on submission. New applications may also be temporarily paused to help maintain service levels.
Given the level of detail required to make applications (it is pretty much the same as the AIF itself) and the fact that you can only include one project per application it will be interesting to see the level of uptake especially taking into account the fact that decisions are not appealable. It will be interesting to see how much the targeted advance assurance will be used in practice.
