Be assured before making R&D tax claims
There are very valuable tax breaks available for companies undertaking qualifying research and development (R&D). Unfortunately, what counts as qualifying R&D for tax purposes is often subject to debate, with many cases ending up at the Tax tribunals after HMRC has disallowed claims.
R&D takes place when a project seeks to achieve an advance in science or technology. Qualifying activities are those that directly contribute to achieving this advance through the resolution of scientific or technological uncertainty. Certain qualifying indirect activities related to the project also qualify as R&D.
Small or medium-sized enterprises (SMEs) can now apply to HMRC for ‘advance assurance’ on specific areas before making a claim for R&D tax relief. Since 18 May 2026, two types of advance assurance have been available:
1. The targeted advance assurance service. This is a pilot service, running to May 2027, giving eligible companies clarity on how HMRC believes the rules apply on specific, complex or high-risk areas of a potential claim. The areas that can be addressed are whether:
Companies can make a maximum of two applications for advance assurance. Each application can only include one project and one area of R&D tax relief. HMRC aims to process applications within 40 calendar days of the application being made. After reviewing applications, HMRC will either:
A company can still make a claim for R&D tax relief where HMRC has declined its application for advance assurance, but this is probably not advisable, as an incorrect claim could lead to penalties.
– the project meets the definition of R&D for tax purposes;
– overseas expenditure qualifies for relief;
– the company can claim R&D relief where work is contracted by one company to another; and
– the company qualifies for exemption from the PAYE and NICs cap, which would otherwise limit the amount of tax credit that can be claimed.
– confirm that advance assurance has been granted; or
– explain why it has not been granted.
2. Full claim advance assurance service. This existing service is aimed at small companies making their first R&D claim. It covers the entire claim for R&D tax relief rather than specific areas and applies for the first three accounting periods. To make an application, it must be the case that the company:
– is an SME (see above);
– has a turnover below £2m and fewer than 50 employees;
– has not claimed R&D tax relief previously; and
– is planning to carry out R&D or has already carried out R&D but has not yet claimed R&D tax relief.
For many years, HMRC ran a ‘light touch’ regime when checking R&D claims, but this is no longer the case, so it is very important to make sure that your claim is valid. We can help you get your tax compliance right in this area, so please contact the JRW Hogg & Thorburn team if you are unsure whether your company’s projects qualify for these valuable tax breaks, or if you want help in applying for advance assurance.
