HMRC launches targeted advance assurance for R&D tax relief claims

What targeted advance assurance is

HMRC has introduced a new process called targeted advance assurance for SME R&D tax relief claims.

The pilot allows eligible SMEs to ask HMRC for a view on up to two specific areas of an R&D claim before the claim itself is submitted.

This is different from full claim advance assurance. Rather than reviewing the entire claim, HMRC focuses only on selected technical or higher-risk areas.

The aim is to provide earlier clarity where businesses are dealing with more complex parts of the legislation.

Why HMRC has introduced the pilot

The R&D tax relief landscape has changed significantly over the past few years.

HMRC has increased compliance activity, introduced additional filing requirements, and placed greater emphasis on evidence and technical justification.

At the same time, some areas of the legislation continue to create uncertainty for businesses, particularly around:

• Whether work qualifies as R&D for tax purposes
• Overseas expenditure
• Contracted-out R&D
• PAYE cap exemptions

The targeted advance assurance process appears designed to reduce uncertainty in these higher-risk areas before a claim is submitted.

For some SMEs, that may provide more confidence when planning future claims or investment decisions.

What areas HMRC will review

HMRC currently allows assurance requests on four specific areas:

Whether the project meets the definition of R&D

This focuses on whether the work meets HMRC’s definition of R&D for tax purposes.

In practice, this usually means demonstrating:

• Technical uncertainty
• An advance in science or technology
• Work carried out by competent professionals

Whether overseas expenditure qualifies

Since restrictions on overseas R&D costs were introduced, this has become a more complex area for many businesses.

HMRC may review whether overseas activities meet the conditions required for relief.

Whether contracted-out R&D qualifies

This area considers situations where one company undertakes R&D work for another.

The rules here can be nuanced, particularly under the post-April 2024 framework.

Whether the company qualifies for exemption from the PAYE cap

Some companies may qualify for an exemption from the PAYE and NIC cap that can otherwise limit the cash benefit of a claim

HMRC can provide assurance on whether that exemption applies.

Who can apply for targeted advance assurance

You may be able to apply if your company:

• Is an SME
• Is carrying out, or planning to carry out, qualifying R&D
• Has not yet submitted an R&D claim for the relevant accounting period
• Has not already received assurance on the same area for the same period

Applications can be submitted directly by the company or through an authorised adviser or agent.

Who cannot apply for targeted advance assurance

The pilot is not available to:

• Large companies
• Companies seeking assurance on more than two areas
• Companies that have already applied for full claim advance assurance for the same period

HMRC also excludes companies where certain compliance concerns already exist, including open Corporation Tax enquiries or involvement in disclosable tax avoidance arrangements.

What you need before applying

Before applying, businesses should prepare key project and company information, including:

• Company Registration Number (CRN)
• Project overview and start date
• Accounting period details
• Forecasted expenditure
• Information about technical activities
• Details of the competent professional and senior officer

Importantly, HMRC does not allow attachments during the application process.

That means the explanation itself needs to be clear, structured and sufficiently detailed from the outset.

How the application process works

Applications are completed online.

HMRC notes that:

• Progress cannot be saved
• Supporting attachments cannot be uploaded
• Separate applications are needed for separate projects or technical areas

If an adviser is applying on behalf of a company, the correct authorisations must already be in place.

What happens after you apply

HMRC says it aims to respond within 40 calendar days, assuming full and accurate information has been provided.

If assurance is granted, HMRC will issue a letter confirming its position based on the information submitted.

If assurance is not granted:

• HMRC will explain why
• The decision cannot be appealed
• The company can still submit an R&D claim through its Corporation Tax return

Importantly, advance assurance is not the same as claim approval. Businesses still need to meet all normal filing and compliance requirements when submitting a claim.

What this means for SMEs claiming R&D tax relief

For SMEs dealing with more technical or uncertain areas of the legislation, this pilot may provide earlier clarity before a claim is filed.

That could be particularly relevant for businesses:

• Using overseas development resource
• Operating through more complex contractual arrangements
• Unsure whether a project meets HMRC’s definition of R&D
• Concerned about PAYE cap restrictions

At the same time, the pilot reflects a broader shift towards greater scrutiny and more evidence-led compliance across R&D tax relief.

The application itself requires businesses to explain their technical position clearly and consistently. That means preparation, documentation and technical reasoning remain critical.

As with all R&D tax relief matters, outcomes depend on the specific facts, activities and evidence supporting the claim.