Advanced Assurance for R&D Tax Credit Relief - the Fiscale perspective
What is it?
Advance Assurance for R&D Tax Credit relief is a new voluntary scheme from HM Revenue and Customs (HMRC) which came into effect from 30th November 2015.
If your company has not previously submitted a claim for R&D Tax Credit, has an annual turnover of under £2million and employs less than 50 staff then it could qualify for Advance Assurance.
Advance Assurance is where HMRC will allow a claim for R&D Tax Credit without any further enquires for the first 3 accounting periods of claiming relief.
Here is what our Technical Director Stephen Bunting has to say about the scheme:
"The new Advanced Assurance initiative from HMRC sounds good doesn’t it?
However, whilst the scheme attempts to help companies claim this valuable relief, in my opinion the current proposals fall well short of the intended aim.
In order to apply for Advanced Assurance a company will initially have to complete a lengthy form and explain to HMRC why they qualify in less than 1500 words."
This is where the Advanced Assurance system is going to fall down on two counts.
Firstly, most companies, and in particular SMEs, are time-poor. While the relief can be a massive boost to any business it has to come second to the “day job” of getting the work done and meeting your customer expectations.
Secondly, the form assumes that SMEs, and in many cases, their general practice advisors have a complete understanding of the 500 pages of generic and, quite honestly, vague guidance notes issued by HMRC.
The purpose of the Advanced Assurance scheme was to encourage more companies to claim. It is well documented that despite this relief being on the statute books for 15 years many companies, especially SME’s, and some advisors, still do not understand this highly specialised area of UK tax.
If a company did not understand they qualified before, this system is not going to change their understanding. The application process will deter rather than encourage them to claim. Very few companies have the time to spend wading through the legislation and rules before completing a lengthy form they do not understand.
Are they any advantages to using Advanced Assurance?
"According to the guidance the assurance will last 3 years, which could give businesses some certainty - a definite advantage.
However, I imagine that, as with any HMRC clearance, this is based on the assumption that nothing changes during that time! If my assumption is correct then the assurance will only last as long as the project takes and if one project is completed during the three year period and a new one started will this automatically be covered by the assurance? I severely doubt it!"
So who is going to benefit from this scheme?
Well this is my list of the requirements:
- Under £2m turnover (HMRC rules)
- Under 50 employees (HMRC rule)
- Never claimed before (HMRC rule)
- Despite never claiming before be aware that they are involved in R&D
- Have time to wade through the 500 pages of guidance to ensure the R&D they are doing qualifies
- Have the time to fill out the form and condense their R&D into a sufficiently succinct paragraph to convince HMRC that they qualify.
The big question...
How many companies will be left at the end of this process?
Not many in my opinion. I believe that the result of Advanced Assurance will be that many more companies entitled to claim R&D Tax Credit will still not be claiming. This is not a step forward - it is just creating another minefield for the unwary.
Want to find out more about R&D Tax Credit or the Advanced Assurance scheme?
Call 01440 708333.