R&D Tax Relief Advance Assurance

HMRC Targeted Advance Assurance for R&D Tax Relief 🔬

Overview 📘

HMRC has launched a targeted Advance Assurance pilot for small and medium-sized companies making R&D tax relief claims.

The aim is to give eligible SMEs earlier clarity on specific complex or higher-risk areas of an R&D claim before the claim is submitted. This may be helpful for tech startups and scale-ups where areas such as subcontracted R&D, overseas development work, or technical eligibility are not straightforward.

This guide explains:

✅ What targeted Advance Assurance is

✅ Who can apply

✅ What HMRC will ask for

✅ The four areas you can ask HMRC to review

✅ What happens after you apply

✅ How Barnes & Scott can help

HMRC states that the service is for eligible SMEs seeking assurance on particular areas of an R&D tax relief claim, and that HMRC aims to process applications within 40 calendar days where full and accurate information has been provided.

🤔 What is targeted Advance Assurance?

Targeted Advance Assurance allows a company to ask HMRC for a view on a specific area of its R&D tax relief claim before the claim is made.

It is not the same as submitting an R&D claim, and it does not replace the normal claim process. Even if HMRC grants assurance, the company must still submit the R&D claim correctly through its Corporation Tax Return and comply with the normal R&D claim requirements.

This process is designed to help companies get clarity on areas where the rules can be difficult to apply.

For example, a software startup may be confident that development work was innovative, but unsure whether HMRC would agree that the project meets the R&D definition. Another company may have used overseas developers and want to understand whether those costs can be included.

✅ Who can apply?

You may be able to apply if your company:

✅ Is a small or medium-sized enterprise, known as an SME

✅ Is carrying out R&D, or planning to carry out R&D, in the accounting period being considered

✅ Has not yet claimed R&D tax relief for that accounting period

✅ Has not already received assurance on the same area of R&D work or the same project for that period

HMRC says the application can be completed by the company itself, or by an agent acting on its behalf.

🚫 Who cannot use targeted Advance Assurance?

Targeted Advance Assurance is not available in every situation.

You will not be able to use it if:

❌ You are a large company

❌ You want HMRC to review three or more areas of your R&D claim

❌ You have already applied for full claim Advance Assurance for the same period

❌ You have already made an R&D claim for the period you want assurance for

❌ The company, or a connected person, has entered into a DOTAS arrangement

❌ The company, or a connected person, has been categorised as a Corporate Serious Defaulter

❌ The company has an open enquiry into a Corporation Tax return

HMRC also confirms that if your application is not accepted, you cannot appeal the decision or apply again for Advance Assurance on the same matter.

🔍 What can HMRC give assurance on?

HMRC allows companies to ask for assurance on specific areas of an R&D claim.

The available areas are:

1️⃣ Whether the project meets the definition of R&D for tax purposes

2️⃣ Whether overseas expenditure qualifies for relief

3️⃣ Whether R&D relief can be claimed where work has been contracted between companies

4️⃣ Whether the company qualifies for an exemption from the PAYE/NIC cap

HMRC’s guidance says you can make up to two applications for assurance. Each application can cover one project and one area of R&D relief. If you want assurance on another project or another area, you will need to submit a separate application.

📝 What information will you need before applying?

Before starting the form, it is worth gathering everything in advance.

HMRC’s online form cannot be saved part-way through, and you cannot add attachments. This means it is important to prepare your answers before you begin.

You are likely to need:

🧠 Competent Professional information  

The form asks for information about the Competent Professional, often shortened to CP.

A Competent Professional is someone with the relevant technical knowledge or experience to assess whether the project involves a genuine scientific or technological advance and uncertainty.

For tech startups, this could be a CTO, senior engineer, lead developer, technical founder, architect, data scientist, or another person with direct knowledge of the technical challenges.

HMRC may ask for a short explanation of why the person is a Competent Professional. This should focus on their practical experience, qualifications, role in the project, and understanding of the technical field.

Example:

The company’s CTO has 12 years’ experience building distributed software systems and led the technical design of the platform. They were responsible for assessing whether existing technologies could solve the latency and scaling issues faced during the project.

🔬 Project overview

The form asks for a short overview of the project.

This should be technical enough for HMRC to understand what work was being carried out, but not so detailed that the main point is lost.

A useful project overview should explain:

✅ What the company was trying to build or improve

✅ The field of science or technology involved

✅ What the technical challenge was

✅ Why existing solutions were not enough

✅ What work was done to try to resolve the uncertainty

For software companies, it is important to avoid describing the project only as a commercial product. HMRC will be looking for the technical advance, not just the business goal.

For example, “we built a new SaaS platform” is unlikely to be enough on its own. HMRC will want to know what was technically difficult about building it.

🧾 The four assurance areas

1️⃣ Whether the project qualifies as R&D

This is likely to be the most relevant area for many early-stage tech companies.

HMRC will ask for more information about the project so it can decide whether the work meets the definition of R&D for tax purposes.

You should be ready to explain:

✅ The field of science or technology

✅ The advance being sought

✅ The scientific or technological uncertainties

✅ How the company tried to overcome those uncertainties

✅ Why the answer was not readily deducible or easily resolved by competent professionals

✅ The direct and indirect activities that related to the R&D project

This is very similar to the thinking required for a strong R&D technical narrative.

A good answer should not just say that the project was difficult, expensive, or commercially risky. The focus needs to be on the scientific or technological uncertainty.

💻 Example for a software startup

A weak explanation might be:

"We developed a new AI platform for our customers."

A stronger explanation would be:

"The company sought to develop a machine-learning system capable of processing inconsistent real-time data from multiple sources while maintaining accuracy and low latency. Existing tools could not achieve the required performance in the company’s use case, and the team had to test several model architectures and data-processing approaches before identifying a workable solution."

2️⃣ Whether overseas expenditure qualifies

This area is relevant if part of the R&D work was carried out outside the UK.

HMRC will ask why the work needed to be done overseas and why the capability was not available in the UK.

The form asks for explanations around:

✅ Why the ability to do the work was not present in the UK

✅ Why the work had to be undertaken in the overseas location

✅ Why it would have been wholly unreasonable to replicate the conditions in the UK

HMRC’s form also makes clear that simply saying workers were cheaper or not available in the UK will not be enough.

This area is important for tech startups using overseas developers, laboratories, testing environments, specialist facilities, or international technical teams.

You should prepare a clear explanation before applying.

3️⃣ Whether relief can be claimed where R&D work is contracted out

This area is relevant where another company, contractor, or customer is involved in the R&D work.

The form asks which scenario applies, such as:

🔹 Your company contracted another party to carry out work

🔹 Your company carried out work to fulfil a contract

🔹 Work was carried out for an irrelievable client

HMRC may ask:

✅ Who the contractor or contracting party was

✅ How and when the decision to undertake R&D was made

✅ What work was contracted out

✅ Who decided R&D was required

✅ Whether R&D was explicitly mentioned in the contract

✅ Whether R&D was intended or contemplated when the contract was agreed

✅ What uncertainty was passed to the contractor

✅ What role the contractor had in the R&D

✅ Whether a joint election applies under CTA 2009 s1142(5)

For startups, this can be a common issue where development work is outsourced, a technical agency is used, or a customer funds a project.

It is important to review contracts, statements of work, quotes, and project records before answering this section.

4️⃣ Whether the company qualifies for the PAYE/NIC cap exemption

The PAYE/NIC cap can limit the amount of payable R&D tax credit a company can receive.

HMRC’s targeted Advance Assurance form allows companies to ask whether they qualify for an exemption from this cap.

The form refers to Conditions A and B and asks for evidence to support the position.

You may need to provide:

✅ Evidence for Condition A (creating/managing IP, employee led and IP ownership)

✅ Details of the roles of employees in the applicant company

✅ Actual or estimated figures and calculations to demonstrate whether Condition B is met (limit on spending on external connected labour)

This area can be relevant for startups with low UK payroll costs, outsourced teams, or group structures where the PAYE/NIC position is not straightforward.

⏭️ What happens after you apply?  

HMRC says it aims to process applications within 40 calendar days, provided full and accurate information has been submitted. HMRC may contact you if it has questions.

If assurance is granted, HMRC will send a letter confirming this based on the information provided. The letter will also explain the company’s responsibilities and what happens if the R&D activities change.

If assurance is not granted, HMRC will send a letter explaining why. HMRC says you cannot appeal the decision or apply again for Advance Assurance. However, you may still submit an R&D claim through your Company Tax Return if you believe the company is entitled to relief.

⚠️ Important points to remember  

Targeted Advance Assurance can be useful, but it is not a full R&D claim review.

You should remember that:

❌ It does not replace the R&D claim

❌ It does not remove the need to submit the Additional Information Form where required

❌ It does not remove the need to keep proper records

❌ It only covers the information provided to HMRC

❌ If the project changes, the assurance may no longer apply

❌ You should prepare the answers before starting because the online form cannot be saved

❌ You cannot upload attachments as part of the online form

🤔 Should my startup apply?

Targeted Advance Assurance may be useful if your company is planning an R&D claim and there is a specific area where the rules are unclear.

It may be particularly useful if:

✅ You are claiming R&D for the first time

✅ Your project is technically complex

✅ You use overseas development teams

✅ You subcontract parts of the R&D work

✅ You are unsure whether your project meets HMRC’s definition of R&D

✅ You are concerned about the PAYE/NIC cap

✅ You want more certainty before submitting the claim

It may be less useful if:

❌ You have already submitted the R&D claim for the period

❌ You need a full review of the whole claim

❌ You are not ready to explain the technical uncertainty clearly

❌ You do not yet have enough project or cost information

❌ You want assurance on more than two areas

🤝 How Barnes & Scott can help

Preparing a targeted Advance Assurance application requires more than filling in a form.

HMRC is asking for specific technical and tax information, and the quality of the explanation matters. For tech startups, it is especially important to explain the difference between commercial product development and qualifying R&D.

Barnes & Scott can help you:

✅ Decide whether targeted Advance Assurance is suitable

✅ Identify the best area to ask HMRC about

✅ Review whether your company is eligible to apply

✅ Prepare the technical project explanation

✅ Work with your Competent Professional to explain the advance and uncertainty

✅ Review overseas, subcontractor, and PAYE/NIC cap issues

✅ Make sure your R&D claim remains consistent with the assurance request

⭐ Key Takeaways

✅ HMRC’s targeted Advance Assurance pilot gives eligible SMEs a way to ask for clarity on specific complex areas of an R&D claim.

✅ It can cover project eligibility, overseas expenditure, contracted-out R&D, or the PAYE/NIC cap exemption.

✅ You need to prepare your answers before starting because the form cannot be saved and attachments cannot be added.

✅ The process does not replace making an R&D claim.

✅ Strong technical explanations and good records remain essential.

Still need help? Speak to our R&D Team.