No records to support research and development tax credit claim

The taxpayer filed corporation tax returns showing trading losses and claims for research and development tax credits available for small and medium-sized enterprises (SMEs) (CTA 2009, Pt 13 ch 2). HMRC opened enquiries and found no evidence to support the claimed expenditure. It therefore issued a closure notice reducing the trading losses to nil. The taxpayer appealed.

The First-tier Tribunal was not willing to accept the taxpayer’s assertions that the expenses had been incurred. The judges found the director of the taxpayer to be a ‘deeply unsatisfactory witness who was willing to say whatever he thought would assist the … case regardless of whether it was true or not’.

The company could not provide evidence to prove that the expenditure had been incurred. Instead, the director said the work product – graphs and equations set out in a slide show - was proof it had incurred the expenditure.

The taxpayer's appeal was dismissed.

Issue: 4726 / Categories: Tax cases