Quinn and subsidised research and development expenditure

Key points

• The First-tier Tribunal found against HMRC in Quinn (London) Ltd an appeal concerning subsidised research and development (R&D) expenditure.
• Quinn’s R&D projects were typically carried out in delivering work for clients.
• The tribunal considered the clients were not subsidising the company’s R&D.
• The tribunal’s decision should provide certainty for businesses and tax advisers but better guidance from HMRC would be welcome.
• Businesses accessing the relief should treat the incentive with the respect that it deserves.

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...