In their 2025 Spring Statement, the Government published consultations to explore ways in which the current R&D advanced assurance scheme could be modified to provide more certainty to businesses.

The fact that there was a current scheme came as a surprise to many who had never heard of it, let alone used it. In fact, in the year 2023 to 2024, only 80 advance assurance applications were made, despite over 11,000 companies being eligible to do so.

The current scheme is only available to first-time SME claimants, is reportedly a difficult and lengthy process, and even when the process is completed, does not provide full certainty to businesses regarding their R&D claims.

The consultation process received 110 written responses from various businesses, tax practitioners, and professional bodies. As a result, HMRC will launch a limited pilot of a new advance assurance service in May this year, which will run alongside the existing advance assurance scheme.

Where the scheme goes from there will no doubt depend on the success, or otherwise, of the pilot scheme.

The pilot scheme will be wider than the old scheme in that any SME planning to claim R&D relief will be able to apply to take part in the pilot, although initially, at least, the number of applications accepted will be limited in order to provide quicker responses and obtain feedback on the process. The previous scheme had been restricted to first-time SME claimants, and large companies are still unable to take part, at least in the pilot, but it is hoped that it will be rolled out to all companies in due course. Given the introduction of the merged scheme to, among other things, simplify the UK’s R&D offering, it would seem counterproductive to reintroduce differentiations between large companies and SMEs again.

Unfortunately, applicants to the pilot scheme will not be able to seek clarity on absolutely anything they want. Firstly, they will only be able to get assurance on two aspects of their claim, and secondly, they must fall within one of the following four issues (at least during the pilot; this may change when the final scheme is rolled out):

• Whether the project meets the definition of R&D for tax purposes.
• Whether overseas expenditure qualifies for relief.
• Which party is able to claim relief for contracted-out expenditure.
• Whether the company qualifies for exemption from the PAYE/NICs cap.

If a company wishes to seek assurance on its whole claim, it will need to do so under the existing advance assurance scheme.

Quite how the pilot will work in practice is yet to be seen, but it is understood that HMRC will review the application and provide assurance on the particular aspects of the claim that the applicant sought clarity on. If HMRC agrees, the applicant can then go on to submit its claim with confidence (at least on those two aspects, but that is not to say that HMRC may still take issue with a different aspect of the claim).

If HMRC refuses advance assurance, there will be no right of appeal. The company can still go ahead and make the claim, but it remains to be seen whether HMRC will be more likely to open an enquiry in this situation. Furthermore, if HMRC succeeds in removing the claim as a result of the enquiry, they have not commented on whether they will be more likely to charge penalties for an incorrect return, given that they had already indicated, prior to submission, that they did not think aspects of the claim were eligible.

This may well dissuade SMEs from applying for voluntary advance assurance under the pilot scheme, preferring to take their chances in the normal way, at least until HMRC has shown itself to be technically competent in being able to understand complex and emerging R&D claims. In this regard, HMRC has announced that they have already established the Research and Development Expert Advisory Panel, comprising six independent experts in fields such as AI, life sciences, and advanced manufacturing. Among other things, the Panel will be responsible for reviewing and updating the examples in the Revenue Manuals to ensure they remain technically up to date and provide clarity on all aspects of R&D.

It remains to be seen how effective the pilot will be. In any event, it will provide HMRC with some valuable feedback on the level of demand generally and, in particular, which of the four topics businesses are most interested in obtaining assurance on. This should allow them to plan the resources they need to successfully deliver a targeted, consistent, and responsive advance assurance service when it is eventually rolled out.