Expenditure was not subsidised

The taxpayer was a building company which carried out construction contracts for large companies. As part of a project it sometimes had to develop new solutions to enable the concept design to be delivered. It claimed research and development (R&D) relief on the expenditure. HMRC refused the claim on the basis the work was subsidised by the customer in that the costs were incorporated into the overall charge.

The taxpayer appealed.

The First-tier Tribunal noted the tribunal had considered similar arguments in Quinn (London) Ltd (TC8321). While not binding the tribunal here decided to follow the approach taken in Quinn – indeed there were ‘striking similarities in both cases’. It concluded the expenditure was not subsidised. The taxpayer had entered into a commercial contract for the construction of a building; the contracts did not contract out R&D activities to be carried out on behalf of the client.

The...