Strictly Money Ltd v The Commissioner For HMRC
[2024] UKFTT 866 (TC)
Flame Tree Publishing Limited v The Commissioners for HMRC
25 April 2024
[2024] UKFTT 349 (TC)
First-tier Tribunal
A publishing company tried to claim tax relief for making its old books available online. The tax office said no, because it wasn't a new enough invention. The court agreed, saying the company didn't prove it was innovative enough or provide good enough evidence of its costs.
Key Facts
- •Flame Tree Publishing (FTP) claimed £266,644 in R&D tax relief for the accounting period ended 30 June 2018.
- •HMRC refused the claim, leading to FTP's appeal.
- •FTP initially claimed seven separate projects met the R&D criteria, but later argued it was a single composite project.
- •The core of FTP's project involved digitizing its archive and creating a searchable, curated resource.
- •FTP outsourced the programming and development to Image File, but did not include these costs in the claim.
- •FTP lacked a time recording system for employee time allocation, relying on estimates.
- •FTP's representatives, Mr. and Ms. Warwick, lacked prior Tribunal experience.
Legal Principles
To qualify for R&D tax relief, a company must meet the tests set out in the BEIS Guidelines, which have the force of law.
CTA 2009, Part 13; Research and Development (Prescribed Activities) Regulations; BEIS Guidelines
The BEIS Guidelines require a strict interpretation; there is little room for purposive construction.
Gripple v HMRC [2010] EWHC 1609 (Ch); Hadee v HMRC [2020] UKFTT 0497 (TC)
To satisfy the burden of proof, a claimant must provide evidence from competent professionals who can testify to meeting the Guidelines' criteria.
AHK v HMRC [2020] UKFTT 0232 (TC)
A 'competent professional' possesses relevant qualifications, experience, and up-to-date knowledge in the field.
Case arguments and Tribunal's interpretation
The claimant must prove which costs in its R&D claim related to R&D activities.
AHK v HMRC [2020] UKFTT 0232 (TC)
Outcomes
FTP's appeal was dismissed.
FTP failed to demonstrate that its project met the BEIS Guidelines' requirements for an advance in science or technology, and it failed to provide sufficient evidence to support the claimed costs.
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