The Advance Assurance process: What can we expect?
Writing for Business Advice, co-founder of GrantTree and resident grants expert Daniel Tenner takes a closer look at the implications of the government’s new Advance Assurance process on R&D tax credits for small firms.
In his Autumn Statement last November, chancellor George Osborne announced the new Advance Assurance process, which is intended to help remove some barriers that prevent small companies from filing R&D tax credits, such as confidence the claim will actually go through.
On paper, it sounds like a perfect shortcut dreamed up for the hundreds of companies which struggle to jump through the R&D hoops to file a claim. However, to paraphrase a famous proverb: The road to easy R&D tax credit filing is paved with good intentions.
A little background on Advance Assurance: it is a scheme run by HMRC open to small companies which have either undertaken R&D or have completed it for other companies. Companies which are eligible must not have claimed R&D tax credits before, must have less than 50 employees and a turnover of 2m or less.
It acts as it is branded: to provide assurance in advance that for the first three accounting periods of claiming for R&D tax relief, HMRC will allow the claim without further enquiries?. In layman’s terms, this means that you can submit your first three R&D tax credit claims and HMRC will not enquire into them.
This may sound too good to be true to many readers and they would be right the devil is in the detail when it comes to Advance Assurance. While no exact details of Advance Assurance have been released yet, we will take an educated guess that it will run similar to this: before submitting your first three R&D tax credit claims, you would apply for a certification from HMRC for Advance Assurance, giving details about your R&D spend, what kind of R&D you are undertaking, etc.
HMRC would then supply it to you, on the understanding that you remain in the brackets you have previously outlined to qualify for Advance Assurance (type of R&D, amount spent on it etc.). If you fall outside of these brackets (which is probable in a small company where you may spend the first year developing an app, and then the following year you could be scaling it and spending more, or you could pivot to something else entirely), HMRC will likely reserve the right to enquire into your application and reject it anyway.
The Seed Enterprise Investment Scheme (SEIS) also offers its own Advance Assurance process. Unfortunately, the reality is that the only SEIS assurance you really receive is that you havent been rejected yet. HMRC cannot legally offer aguaranteed? yes in advance it can only offer a we can’t see a reason to say no yet? compromise.
Although HMRC is undoubtedly well-intentioned, Advance Assurance does not solve the underlying barrier of R&D tax credits, because you can still have your claims enquired into after or during the three initial claims. With the SEIS application, we advise our clients to submit as much potentially disqualifying information as possible, because the only clear signal you can ever get from Advanceassurance is a no. A yes? is always conditional on there being no new disqualifying conditions emerging later. HMRC can always claw back relief up to seven years back.
Daniel Tenner is a serial entrepreneur and, most recently, the founder of GrantTree a business established chiefly to assist others with funding requirements. From both tax schemes like R&D tax credits to UK government schemes such as InnovateUK's Smart Grants, and EU schemes like Horizon 2020.
Research and development (R&D) tax experts Jumpstart have warned that the government's new Advanced Assurance process, which encourages small businesses to claim for research and development tax relief, is certain to disappoint. more»