Scheme fails

Claim for capital allowances on research

The partnership was set up to undertake scientific research and claim capital allowances on the relevant expenditure. The partnership paid say £100 to a special purpose vehicle (Numology) to carry out research. A third party verified the £100 as the amount required to undertake the research conventionally. Numology then subcontracted another company BRC to do the work more cheaply paying it say £6. The aim was that although Numology had paid only £6 to BRC the partnership would claim capital allowances on the £100 it had paid to Numology.

HMRC said elements of the scheme were a sham and that only £6 qualified for capital allowances because only that would be spent on scientific research. Further the partnership’s activity for tax purposes was not a trading one.

The First-tier Tribunal dismissed the partnership’s appeal.

The...