The current process 

A company planning to carry out  R&D can apply to HMRC for advance assurance that it will qualify for R&D tax relief for that project. If HMRC agrees that tax relief is due, HMRC will accept the company’s claims for that project for up to three accounting periods, provided the activity remains in line with what was discussed and agreed in the company’s application.  

Advance assurance is restricted to smaller companies that are claiming R&D tax relief for the first time. Take-up has been lower than expected, with only 80 applications received from 11,500 eligible claimants in 2023/24. 

Proposed changes 

On 26 March 2025, the government published a consultation document exploring how alternative advance clearance processes could be designed to reduce error and fraud and to give companies greater certainty in relation to R&D tax relief. The government believes that there are three stages at which a form of assurance may be useful: 

• at an early stage, when research activity has not started or has only recently begun (‘pre-activity’);
• when activity is well underway but before the claim is made (‘pre-claim’); and
• when a claim has been made but before payment (‘pre-payment’). 

Views were sought on these three options, along with the possibility of charging for voluntary clearances and mandating the use of advance assurance in some circumstances. 

In addition, the government is interested in re-introducing a minimum expenditure threshold for R&D tax relief generally. This would restrict R&D tax relief to companies entering into projects involving R&D expenditure above the threshold amount.  

ICAEW’s view 

ICAEW has responded to the consultation in Representation 40/25. 

ICAEW believes that take-up of any advance assurance could be “small-scale”, due to issues with the existing compliance process. Changes made in recent years to HMRC’s approach to enquiries, and the introduction of new information requirements, have placed a significant burden on companies and their agents.  ICAEW recommends that HMRC explores making better use of the mechanisms already in place before making further changes to already onerous compliance requirements.  

ICAEW recommends that any new clearance process: 

• guarantees quick and efficient turnaround times and a reduced compliance burden for companies with robust R&D claims;
• is appropriately resourced and managed by HMRC; and
• gives companies using it certainty of tax treatment and some form of incentive, for example, a reduced compliance burden going forward. 

ICAEW is not against making the process mandatory for some companies. However, the criteria for determining if a business is required to use the service must be developed and managed with care to avoid impacting negatively on compliant companies. ICAEW believes that companies may be willing to pay for advance assurance if there is a clear benefit to the company, for example, a high degree of certainty that claims will not be challenged for a specified time.  

ICAEW is concerned that a minimum expenditure threshold could be difficult to apply where a project spans more than one accounting period. Further, it could create a cliff-edge that may encourage dubious claimants to inflate claims. ICAEW’s response also suggests that the compliance costs involved in getting a claim agreed by HMRC may already provide the equivalent of a minimum expenditure threshold in practice, making smaller claims uncommercial to submit and defend in the face of an enquiry.