Update: R & D and Small Companies

It will be easier for small companies to make claims for research and development tax relief, under new HMRC proposals.

From November 2015 HM Revenue and Customs (HMRC) are introducing Advance Assurance for companies that claim or want to claim Research and Development (R&D) tax relief.

If Advance Assurance is granted, for the first 3 accounting periods of claiming for R&D tax relief, HMRC will allow the claim without further enquiries.

Applying for Advance Assurance is voluntary and you can do this at any time before the first claim for R&D tax relief.

Companies will still be able to apply for R&D tax relief without Advance Assurance.


Advantages                                                                 

  • Companies will know whether or not their activities qualify for tax relief in advance, allowing them to plan ahead. This may also increase the chances of investment and funding.
  • Advance Assurance will remove the time-consuming burden of resubmitting claims, for a three year period.

Conditions

Your company can apply for Advance Assurance if it’s planning to carry out, or has previously carried out R&D. It has to meet certain conditions which are that:

  • it has not previously made an R & D claim;
  • it is classified as a ‘small company’, that is, it has an annual turnover of £2 million or less and has fewer than 50 employees.

HMRC won’t offer Advance Assurance if your company:

  • entered into a Disclosable Tax Avoidance Scheme (DOTAS)
  • is a corporate serious defaulter

Application

An application can be made by either the company or a registered agent who deals with their tax affairs.

To apply, complete form CT R&D (AA), at the following link:

https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/CorporationTax/1.0/CTRD&template=CTRD.xdp

When HMRC contacts you to discuss your application, they’ll need to talk to a company director or an employee (for example, research manager), however your agent will be able to contribute.

When making an application, you'll need to include:

  • your company accounts;
  • your company registration documents (from Companies House);
  • HMRC correspondence;
  • previous company tax returns (not needed for new companies);
  • the name of a main contact - someone with a direct knowledge of your company R&D (for example, research manager or company director) and who may be required to discuss the application with HMRC.

For future periods, HMRC will contact someone at the company. This is to check that the R&D matches the details in the Advance Assurance application form.

Decision

If HMRC is satisfied that your company activities are within the rules of the scheme they’ll send a letter confirming their decision.

If your company is granted Advance Assurance for 3 accounting periods HMRC will send you an agreement letter. This letter will explain your company responsibilities.

If your company is not given Advance Assurance you will receive a letter giving you the reasons why.