Stage One Creative Services Limited v The Commissioners for HMRC
[2024] UKFTT 1059 (TC)
Tills Plus Limited v The Commissioners for HMRC
11 July 2024
[2024] UKFTT 614 (TC)
First-tier Tribunal
A company claimed tax breaks for research and development (R&D). The tax office said the company didn't really do R&D and the payments weren't properly made. The court agreed that the company didn't do R&D but said the way the payment was handled was fine. So the company didn't get the tax breaks.
Key Facts
- •Tills Plus Limited claimed R&D tax reliefs for 2018 and 2019.
- •HMRC disallowed the claims, issuing closure notices and an assessment to recover over £390,000 already paid.
- •Tills Plus appealed, focusing on whether payments to its Iranian subcontractor, iWond, met the statutory requirements.
- •HMRC argued the payments weren't made by Tills Plus and the expenditure didn't qualify as R&D.
- •The Tribunal considered the scope of the appeal, the admissibility of HMRC's R&D argument, and the evidence presented.
Legal Principles
The scope of an appeal is defined by the closure notice's conclusions and required amendments, not HMRC's reasoning.
Fidex Limited v HMRC [2016] EWCA Civ 385 and Investec Asset Finance Plc v HMRC [2020] EWCA Civ 579
HMRC can advance new arguments supporting closure notice conclusions, subject to fairness and case management.
Fidex Limited v HMRC [2016] EWCA Civ 385 and Investec Asset Finance Plc v HMRC [2020] EWCA Civ 579
For R&D tax relief, a 'subcontractor payment' requires a genuine obligation discharged at the company's expense, not necessarily direct payment from the company's account.
Sections 1053, 1133, and 1136 Corporation Tax Act 2009
R&D expenditure must involve a project seeking an advance in science or technology by resolving scientific or technological uncertainty, not readily deducible by a competent professional.
Sections 1041 CTA 2009, s 1138 CTA 2010, s 1006 ITA 2007, R&D (Prescribed Activities) Regulations 2004, Guidelines on the Meaning of Research and Development for Tax Purposes
Outcomes
The Tribunal upheld the closure notices.
Tills Plus satisfied the payment condition for R&D relief because the subcontractor's invoice was discharged at their expense, even though the payment originated from a loan.
The appeal against the paragraph 52 assessment was allowed.
The assessment was deemed unnecessary given the disallowance of the R&D claims.
The R&D claims were disallowed.
The expenditure did not qualify as R&D because the evidence did not consistently demonstrate a project seeking to advance science or technology by resolving scientific or technological uncertainty; instead, it appeared to involve integrating existing technologies.
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