Expenditure was neither subsidised nor contracted out

The taxpayer provided engineering construction and automation solutions for live events and installations. The projects were varied and could involve various stages of development. The taxpayer claimed research and development (R&D) relief for expenditure incurred under various contracts for the years ended 31 December 2017 2018 and 2019. The contracts included no mention of R&D for which the taxpayer claimed relief. Any intellectual property generated while the taxpayer worked on projects remained the property of the taxpayer.

After an enquiry HMRC issued a closure notice disallowing R&D relief for 2019 and issued discovery assessments for the two previous years. This was on the basis that the expenditure was subsidised and contracted out.

The taxpayer appealed.

On the subsidised expenditure issue the First-tier Tribunal noted that although Quinn (TC8321) was not binding it was ‘persuasive’. It decided to follow the tribunal’s reasoning in that decision...