If a company has its R&D claim rejected by HMRC, it can take its case to a First Tier Tribunal (FTT) to obtain a ruling as to the validity of the claim, but does this ruling have any effect on other cases?

According to HMRC it doesn’t, as the following statements were made at the R&D Communication Forum (RDCF) meeting in December 2021, when following its loss at an FTT (Quinn v HMRC UKFTT0437) HMRC informed members of the RDCF that;

“HMRC will not appeal the decision. However…….FTT decisions are not binding and have no precedent value. They are made on the facts of the specific case.”

and

“As is the case with the decision in the Hadee Engineering Limited decision, the Quinn London Limited decision is a decision of the First-Tier Tribunal. As such it does not create a binding precedent in relation to other taxpayers.”

BUT, during a recent compliance check, HMRC also made the statement:

“Currently, the information you have provided lacks evidence to support the assertions you make. This is insufficient to meet the burden of proof which is placed on you by existing case law…..Hadee Engineering Co Ltd v Revenue & Customs (UKFTT 497 10 December 2020)”

So, according to HMRC, the ruling from the Hadee Engineering First-Tier Tribunal both does and does not affect other cases depending on which view benefits HMRC the most.

This is another example which shows HMRC’s current compliance activity with regards to R&D tax relief claims is woefully insufficient.

If you have any questions on this blog or anything R&D related, please contact us at [email protected].

Posted: 25 Jun 2024