Specialist Tax Adviser Aiglon Consulting
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istock_tribunal_Chris Ryan

R&D: Claim failed on evidence mistakes


The company’s appeal against HMRC’s refusal of its R&D claim failed, due to key evidence provided late and in the wrong manner, to the first tier tribunal (FTT).

10th Nov 2021
Specialist Tax Adviser Aiglon Consulting
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Sinking feeling

Reading the FTT decision in Grazer Learning Ltd (Grazer) (TC08282) gave me a sinking feeling. Once again, a claim for R&D tax relief has failed because of an apparent lack of credible evidence to support it. However, it appears that evidence might have been available, if only it had been submitted in the correct manner so that it was admissible in the tribunal hearing.

R&D project

Grazer submitted a claim for R&D relief for the year ended 31 October 2017 which related to the development of a platform to enable the matching of providers and customers of digital learning services. The intention was to develop a solution that would be able to consider a learner’s prior experience and specific learning goal in then offering learning content. Although Grazer’s director had considerable prior experience in the learning sector, he was not a software expert so that part of the work was contracted out to Halcyon Consulting (Halcyon).

The claim related to expenditure incurred on payments to Halcyon and resulted in the payment to the company of a credit of £26,050. HMRC later opened an enquiry into the return.

Evidence bundle

Grazer’s claim was supported by a report prepared by Haines Watts. HMRC appears then to have met with either or both Haines Watts and Grazer to discuss the claim and a series of letters and emails were exchanged. At the end of that, HMRC concluded that there was no evidence of R&D activity, rejected the claim and demanded repayment of the credit received by the company.

What makes this case particularly intriguing and perplexing is that it seems that further evidence in support of the claim – including four witness statements – may have been put together, albeit belatedly, for presentation to the tribunal. Unfortunately, because this additional evidence was not copied to HMRC in advance of the hearing (as required), the Judge had no option but to determine that this evidence was inadmissible.

Copies required

The failure to supply copies of the additional evidence to HMRC is quite surprising, not least because the requirement to do so was clearly stated by the tribunal in ‘comprehensive directions’ in relation to the hearing.

Each party was required to “send or deliver to the other party statements from all witnesses on whose evidence they intend to rely at the hearing setting out what that evidence will be ('witness statements') and... notify the tribunal that they have done so.” Naturally, there was a deadline for such submissions.

For reasons that are not clear from the written judgement, it seems that Haines Watts sent a witness statement from the company’s director to the tribunal four months after the deadline but did not copy it to HMRC. Subsequently, they sent three more witness statements to the Tribunal, just three days before the hearing, but again did not send them to HMRC.

The Judge was clearly unimpressed, stating that:

“It is simply inexplicable that the Appellant did not follow the procedure set out in the direction mentioned in paragraph 8 above. There was nothing ambiguous about the scope of that direction.”

Decision made

Having refused to admit the new evidence, the tribunal was left to make its decision based solely on the following evidence:

  • The R&D report prepared by Haines Watts.
  • The note of a meeting between the parties held on 12 March 2019.
  • Letters from HMRC to Haines Watts dated 30 November 2018, 29 March 2019 and 12 July 2019.
  • Emails from Haines Watts to HMRC dated 25 June 2019 and 8 July 2019.

The problem for Grazer was that this evidence clearly did not support the case that the activity was R&D. This is summed up by the Judge when he says:

“In my view, it is wholly unclear from those documents whether the creation of the platform… involved the creation of new technology which was designed to resolve a scientific or technological uncertainty or was no more than a novel utilisation of existing technology or an adaptation of existing technology, and, in the latter case, whether that adaptation was readily deducible by a competent professional working in the field.”

The Judge is not saying that the activity was definitely not R&D, he is saying that the evidence before him did not support that position. In other words, it might have been R&D but the evidence put before the tribunal (and HMRC) did not do enough to demonstrate that position.


The appeal failed because the evidence of R&D activity wasn’t there. I am left wondering whether the evidence submitted late and therefore not admitted by the tribunal would have changed the outcome. Either way, this case does not make good reading.

Replies (1)

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By Ian Bee
12th Nov 2021 12:32

All very strange.

Odd that elementary mistakes made in disclosing the evidence but also odd that HMRC was interested in pursuing this for a relatively small amount £26k, particularly when there was some back up, if not complete.

At the same time there is a report of HMRC losing billions on fraudulent furlough claims.

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