Is advance assurance the key to claiming with confidence?

The Autumn 2025 Budget unveiled a new R&D advance assurance pilot to help SMEs gain certainty on their tax relief claims. The government’s commitment to innovation remains clear: R&D tax reliefs are central to achieving the OECD goals of improving quality of life and driving sustainable economic growth. R&D tax relief is also at the forefront of the UK government’s stated intention to keep the UK at the forefront of World Innovation.

With significant reforms to R&D tax relief rules now in force, certainty over the application of these new Merged R&D rules has never been more valuable. Companies need confidence in claiming valuable tax relief, and the introduction of the R&D advance assurance pilot may be a solid step forward in helping rebuild that confidence, which had been eroded in recent years, given HMRC’s heavy-handed manner of checking the accuracy of R&D claims being made.

What is Advance assurance for R&D?

Launching in Spring 2026, the new R&D advance assurance pilot will allow Small and Medium-sized Enterprises (SMEs) to obtain agreement in advance from HMRC on key aspects of their R&D tax relief claims before submission. The service is tailored to be open to all companies, those already making claims, and those considering a claim for the first time, together with those that may have had their prior claims rejected by HMRC.

The benefit? Confidence in claim submission, faster processing, and reduced risk of challenge from HMRC on the accuracy of a company’s claim. This is achieved by HMRC dealing with the challenging questions in advance of claim submission.

Participation is voluntary, but opting in could deliver significant advantages:

• Peace of mind under the new Merged R&D rules
• Confirmation on whether overseas expenditure is eligible and meets the conditionality obligation.
• Where R&D is subcontracted, agreement can be gained from HMRC on which party is entitled to the R&D claim on the contracted-out R&D.
• Faster claim turnaround thanks to pre-agreed positions
• Lower penalty risk, as HMRC has confirmed its stance upfront

On the face of it, this looks like a valuable service, but this will require adequate staffing of HMRC personnel, and these staff members will need adequate training to allow them to determine some of the complicated positions that will be presented in the new merged legislation.

Full details of the pilot have still to be released, and what the eligibility of SME’s for inclusion will be. However, under current rules, the SME test looks at the company, or effectively the overall group position. To qualify, the group must have fewer than 500 employees and either turnover below €100 million or gross assets under €86 million.

Why is the advance assurance scheme important for tax reliefs?

A new R&D tax relief regime applies to accounting periods starting on or after 1 April 2024 and introduces complexity.

For example:

• Uncertainty over which company can claim R&D tax relief where the R&D is contracted out to another party.
• Restrictions on offshore R&D expenditure: Payments for work outside the UK – whether by subcontractors or externally provided workers – must generally be excluded unless exemptions apply. Overseas employees can still be included, subject to conditions. The degree to which HMRC will accept these exemptions remains untested in practice, due to the rules being so new. It will take time for case law to establish how the courts will interpret the legislation.

The R&D advance assurance pilot offers a way to lock in certainty before committing resources, reducing risk and enabling confident planning.

Is there anything unclear about the advance assurance pilot?

Questions remain about how HMRC will manage this in practice. Past delays and staffing constraints raise concerns about bottlenecks. Will technology play a role in speeding up decisions? And, as with previous advance assurance, this does not remove the need to file full R&D tax relief claims; any discrepancies must still be explained. Historically, R&D advance assurance could cover up to three years, and it’s unclear if that will continue.

The pilot follows an HMRC consultation, with responses expected alongside the launch. Insights will shape the future of this service and its role in supporting innovation.

Next Steps for Businesses

If your organisation is thinking about making a claim, consider whether the R&D advance assurance pilot is right for you, especially if your claims involve complexity or offshore costs. Early preparation could help you secure certainty and avoid disputes.

If you have any queries about the positioning of your R&D claims for assurance or need support navigating the evolving rules with confidence, please do not hesitate to get in contact with Ross Parsler or a member of our Corporate Tax team.