The existing clearance process is available to smaller claimants with turnover below £2m and fewer than 50 employees. Members have advised us that the existing scheme is not widely used and the consultation document confirms that only 80 applications were received from 11,500 eligible claimants in 2023/24.  

The consultation seeks to understand this lack of take-up and to consider how the existing process could be improved to: 

• reduce error and fraud in R&D tax reliefs;
• improve the customer experience; and
• give businesses greater certainty. 

Mandatory and voluntary clearances  

HMRC recognises that a voluntary service available to all is not feasible as resources would be pulled away from other compliance activities. Also, it would be unlikely to reduce fraud and error significantly. However, mandating claims in areas where non-compliance is more prevalent could assist in mitigating poor practices. 

Therefore, any advanced assurance scheme would be available to a “well-defined subset” of claimants. The consultation seeks views on what types of companies should have access to a voluntary service, suggesting that growing and high-potential companies may be appropriate.  

Timing and focus of clearances 

HMRC is seeking views on which stage a form of assurance might be most useful and gives three potential scenarios: 

• at an early stage, when research activity has not started or has only recently begun (pre-activity);
• when activity is well underway but before the claim is made (pre-claim); or
• when a claim has been made but before payment (pre-payment). 

The document sets out how an assurance service might apply at each of the three stages, and makes suggestions around eligibility and level of assurance. Clearly, the later in the R&D process assurance is sought, the greater the certainty for claimants. 

HMRC would also like to understand whether assurance should be provided for the entire claim or for specific issues in the claim, and what types of issues typically cause concern in claims. 

Minimum expenditure threshold 

The consultation document also indicates that the service may be limited by size of claim (as is the case for the current service) and also seeks views on the re-introduction of a minimum expenditure threshold (MET) more widely. This would be an expenditure threshold under which no R&D tax relief could be claimed. HMRC says that a MET could free up HMRC’s resources to enable it to offer a wider advanced clearance service. 

Other questions 

The consultation raises further interesting questions including: 

• whether companies may be willing to pay to take part in an advanced assurance scheme; and 
• whether a voluntary service should be aimed at those claimants advised by an agent who is registered with HMRC or a member of a recognised professional body.  

Have your say 

The Tax Faculty will consult widely on these questions to ensure member views are appropriately captured and continue to work closely with the government on changes in this area. Any member comments should be provided to angela.clegg@icaew.com and richard.jones@icaew.com.