Behind the Scenes: Advanced Notification in Practice

By James Allen, ABGi UK

The working life of a R&D tax consultant is a minefield. Whether it is applying poorly-defined HMRC legislation or navigating tricky clients, there are many learnings to be gleaned. In what we hope will be the first of many, one ABGi consultant shares lessons learned from the unusual conditions pertaining to meeting Advanced Notification requirements …

At first glance, the criteria determining whether an R&D tax incentive claim requires HMRC be given advanced notification is fairly simple. If no historic claims have been made by the client or it is more than three years since the date of their last claim then the Additional Information Form (AIF) must be completed.

With many of our larger clients carrying out eligible R&D work every year, it can be understandable to assume that AIF forms wouldn’t be necessary for them. However, the structure of these large businesses is often not straightforward. And, if one subsidiary has made a claim within the three-year window, the remaining subsidiaries cannot piggyback off this claim. The AIF criteria must be applied to each subsidiary independently. This has meant having to trawl through our client list confirming whether their subsidiaries have or haven’t made previous claims.

Again, this sounds straightforward but for larger businesses it really isn’t. These companies do their tax submissions via auditors and tend to only inform us when they have received the money from HMRC not when the tax computation has been submitted. In many cases, they hold on to the figures we provide them for months before making a submission.

In some cases, their tax computations have been submitted already without an R&D figure and therefore, required to submit their R&D tax incentive claim via an amendment. When this happens, the particular claim in question does not count as a claim submitted in the previous three years and must be an original tax computation submission to be considered.

That HMRC then provided incorrect guidance for a 5 week period in 2024 has introduced an additional caveat that has only increased the complexity of an already complex piece of legislation. HMRC’s error affected only one from our larger client base. This particular client had made multiple historic claims but always by an amendment and their notification period fell into the relevant window.

Initially, we had assumed that they’d missed out on being able to claim but double checking the date they submitted their tax computations revealed this not to be the case. Fortunately, when raised, HMRC readily acknowledged the situation and the claim was accepted without further delay.

Another of our clients will also be affected by this legislation and we will be able to utilise documents from the first experience as templates to smoothen the journey the second time round.

While the advanced notification requirements are simple in theory, the associated nuances mean in practice it is anything but.

If you’re working through similar situations or aren’t sure how the rules apply in your case, just get in touch and we can look at it with you.