Quinn and subsidised research and development expenditure

HMRC’s narrowing of its approach to subsidised research and development (R&D) expenditure has been a cause for concern for tax advisers dealing with research and development (R&D) tax relief. It potentially narrows the scope of R&D tax relief for a substantial number of small and medium-sized enterprises (SMEs). However a recent First-tier Tribunal decision finding against HMRC has provided some much needed clarity – and represents a landmark moment for businesses accessing SME R&D tax relief.

Earlier this year we reported that HMRC was challenging a growing number of SME R&D tax relief claims for customer-led R&D projects. HMRC’s view was that any R&D activities carried out to deliver goods and services to customers were being subsidised by the fees paid by those customers.

It would be easy to underestimate the impact this relatively niche point of legislative interpretation could cause. However commercialising the outcome of R&D...