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13 October 2015
Brain Disorders Research Limited Partnership (TC4510)
The partnership was set up to undertake scientific research and claim capital allowances on the relevant expenditure. The partnership paid (using simplified hypothetical numbers) £100 to a special purpose vehicle (SPV) to carry out research. A third party verified the £100 as the amount required to undertake the research conventionally. The SPV then subcontracted another company to do the work more cheaply. The plan was that although the SPV had paid only £6 to the subcontractor the partnership hoped to claim capital allowances on the £100 it had paid to the SPV.
HMRC said that elements of the scheme were a sham and that only £6 qualified for capital allowances because no more than that would be spent on scientific research. Further the partnership’s activity for tax purposes was not a trading one.
The partnership...
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