Consultation response: R&D Tax Relief Advance Clearances

The ATT has responded to HMRC’s consultation on R&D tax relief advance clearances.

This consultation seeks views on clearances for the Research and Development (R&D) tax reliefs, with the aims of reducing error and fraud, increasing certainty for customers, and improving customer experience.

As a tax body, the ATT’s response does not address some of the commercial questions posed, but key themes from our response include:

• The current advance assurance regime is not widely used, as many claimants and advisers feel the time and cost involved outweigh the benefits.
• There are a number of ways in which the regime could be made more attractive, including allocating additional resources, improving flexibility, and ensuring that those administering assurances have the right skills and expertise.
• Claimants continue to face significant uncertainty around whether activities qualify as R&D and who can claim for contracted-out work. Advance assurance in these areas would help support genuine innovation and investment.
• We do not believe advance assurance should be limited to certain industries or types of company. It should be available to any business seeking reassurance.
• We do not believe that a Minimum Expenditure Threshold should be set for R&D relief claims. Whether work qualifies as R&D depends on its nature and purpose, not the amount spent.
• We are not in favour of making clearances mandatory only for certain claimants, as this risks creating a two-tier system. However, we recognise there may be a case for targeted mandatory clearances in high-risk sectors, though identifying these companies in practice could be challenging.
• We do not believe any of the three options for voluntary or mandatory assurances set out in the consultation would be particularly useful or attractive. Rather than adding further compliance burdens, we believe the Government should take a broader look at how to reduce error and fraud.