Application satisfied tests for research and development

The taxpayer submitted a research and development (R&D) claim related to a computer application using artificial intelligence to create a set of ‘know your client’ tools for the purposes of verification and risk profiling. It included considerable of evidence to support its claim.

HMRC refused the claim saying it did not consider the work amounted to R&D. Broadly the project did not advance overall knowledge or capability. The taxpayer submitted more information and although HMRC said the work was ‘impressive’ it still maintained that it did not constitute R&D.

The taxpayer appealed.

The First-tier Tribunal was impressed with the taxpayer’s evidence and noted that the officer dealing with the case had no technology experience. This was the first software claim he had dealt with which put him in a ‘difficult position’. However the tribunal found him an ‘honest straightforward witness who was clearly trying to...