Company did not meet going concern condition

The taxpayer was an engineering and construction company which by the end of 2016 was experiencing losses because of technology challenges in its business. It stated in its 2017 accounts that while the company was committed to completing its existing contracts it had ceased all new tendering activities. As a result the financial statements had ‘not been prepared on a going concern basis’.

In April 2019 the taxpayer claimed research and development expenditure credits (RDEC) of about £1.93m in its corporation tax return for the year ended 30 December 2017. HMRC refused the claim on the basis that the 2017 accounts indicated the company was not a going concern and this remained the case in the 2018 accounts. One of the conditions for a company to be entitled to a RDEC was that it had to be a going concern at the time the...