Research and Development (R&D) Tax Relief can provide additional tax deductions and enhanced cash flow for companies that develop new products, processes or services. Although widely available, R&D claims are often overlooked, and many companies that would be eligible to make a claim fail to do so.
To encourage more companies to claim R&D Tax Relief, HMRC recently introduced Advance Assurance. This is a new initiative which enables small companies to seek HMRC’s prior opinion on whether the R&D they are carrying out, or are planning to carry out, will qualify for R&D Tax Relief. With this added assurance from HMRC, combined with recent increases in the rates of relief available, there has never been a better time to make a claim.
The tax saving generated from a claim can be significant. For example, a company incurring £100k of costs on qualifying R&D activity could save up to £26k in corporation tax. Alternatively, if the company is loss making, it may be possible to surrender the loss for a cash repayment, of up to £33.3k for every £100k of expenditure. This could significantly improve cash flow for new companies and provide much needed investment for the business.
What is Advanced Assurance?
Advance Assurance is a voluntary scheme focused on first time claimant smaller companies.
In order to access Advance Assurance, the company must:
- not have claimed R&D tax credits before;
- have an annual turnover of £2 million or less, and;
- have less than 50 employees.
Successful applicants will have assurance from HMRC that their first three years of R&D tax relief claims will be accepted.
If you’re planning to carry out R&D at a future date, Advance Assurance can still be applied for.
HMRC will contact you after you’ve submitted your first claim to check that the R&D undertaken matches the details supplied in the Advance Assurance application.
How we can help
We have extensive experience of dealing with R&D Tax Relief claims, and can apply for Advance Assurance on your behalf as a first step in preparing a successful claim.
If you would like to discuss your eligibility for claiming R&D tax relief and how you could obtain certainty through using the Advance Assurance scheme please get in touch with us.
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