HMRC’s R&D advance assurance consultation – What’s changing?

HMRC has launched a consultation on further reforms to the research and development (R&D) tax relief scheme, focusing on the introduction of a new advance assurance system. These proposals aim to provide greater certainty and enhance the customer experience for businesses claiming R&D tax relief, while addressing non-compliance, error and fraud. However, the changes could increase the administrative burden and costs associated with making R&D claims.

If your company relies on R&D tax relief, staying informed and planning ahead is key. The consultation serves as a reminder that the R&D compliance requirements are tightening. Now is the time to review past claims and ensure future ones align with HMRC’s evolving expectations. Navigating R&D tax relief reforms is complex, so engaging a trusted, experienced specialist can help ensure your claims are accurate, compliant and optimised for the best financial outcome.

Background: R&D advance assurance

The UK R&D tax relief schemes support businesses investing in innovation by reducing their tax liabilities or providing cash credits. These incentives play a vital role in the government’s growth mission, fostering technological advancements, particularly in sectors like manufacturing, software development, life sciences and engineering.

However, HMRC has expressed concerns over fraud and error rates in R&D claims. In the 2020–21 tax year, an estimated £1.13 billion (approximately 16.7% of total R&D tax relief claims) was lost due to non-compliance. Whilst HMRC’s publication at the Autumn Budget 2024 of ‘Approach to Research and Development tax reliefs 2023 to 2024’ indicates that the error and fraud rate has reduced to 7.8% for that period, they maintain that more can be done. As a result, HMRC has intensified scrutiny of claims, leading to increased compliance checks and processing delays for businesses. The new consultation on advance assurance is a further part of a broader effort to strengthen the integrity of the R&D tax relief system.

What is advance assurance?

If a company is granted advance assurance, HMRC accepts its R&D tax relief claims will not be subject to enquiry for three years, provided they remain consistent with the agreed scope of qualifying activities. This reduces the potential for onerous compliance checks, as well as delays in paying of credits. Given HMRC’s increasing compliance activity in the sector, with 17% of claims being subject to checks in 2023/24 (up from 10% in the previous tax year), advance assurance can provide much needed certainty for claimants. However, only a subset of companies can apply (first-time claimants with fewer than 50 employees and a turnover of less than £2 million), and uptake has been very low, with only 86 applications in 2023/24, representing just 0.1% of total R&D claims.

What is HMRC proposing?

The consultation explores ways to reform and expand advance assurance, making it more accessible and possibly mandatory for certain claimants. The key proposals include:

(a) determining whether to make advance assurance voluntary or mandatory, particularly for ‘high-risk’ claims, such as those in sectors with historically high error rates or for first-time claimants.

(b) deciding at which point in the innovation lifecycle assurance may be sought: before the R&D occurs, as the R&D submission is being prepared or post-submission but pre-payment.

(c) considering whether to introduce a de minimis claim value, as a large proportion of erroneous or fraudulent claims are below £25,000 (equivalent to a cash benefit of approximately £4,000) thus involving a disproportionate HMRC effort.

Potential impact on businesses

The proposed changes could give companies greater certainty (avoiding potentially burdensome compliance checks), faster processing (pre-approved claims could lead to quicker repayments) and release HMRC resources to focus on more dubious claims. However, mandating advance assurance imposes a further administrative burden on claimants, in addition to the recently introduced claim notification and additional information form requirements. It potentially increases costs as the consultation considers whether advance assurance would be a paid service.

Perhaps most crucially, the biggest challenge remains HMRC’s capacity and capability to process applications. If recent experiences with HMRC’s compliance checks are any indication, it is unlikely that expanding the advance assurance scheme will yield the outlined benefits. HMRC officers often lack technical training and scientific or technical expertise, coupled with the ‘workflow’ processing results in substantial ‘pick up and put down’ time as different caseworkers are assigned to claims,

What should R&D claimants do now?

The consultation is open until 26 May 2025, and HMRC is actively seeking input from businesses and advisers. If you believe you may be impacted or would benefit from advance assurance, responding to the consultation ensures that your concerns are heard. Moore Kingston Smith has a specialist R&D team that advises on numerous R&D claims. As such, we will be responding directly. If you’d like to discuss these issues or for us to consider confidentially factoring your perspective and views into our response, please let us know.

If you have questions about your R&D tax relief claims, contact our team today for expert guidance.