Collins Construction Ltd v Revenue and Customs (CORPORATION TAX - relief for expenditure on research and development - Whether "subsidised expenditure") [2024] UKFTT 951 (TC) (21 October 2024)

Collins Construction Ltd v Revenue and Customs (CORPORATION TAX - relief for expenditure on research and development - Whether "subsidised expenditure") [2024] UKFTT 951 (TC) (21 October 2024)

The Tribunal held that the expenditure was not 'subsidised expenditure' under section 1138(1)(c) CTA 2009, as the payments made by clients under arm's length commercial contracts for specified works did not amount to meeting the R&D expenditure in the sense required by the statute. There was no clear link between the payments and the specific R&D costs, and the contracts did not require or reimburse R&D. The Tribunal also found that the activities were not contracted out, as there was no contractual requirement for R&D, and Collins undertook the risk and retained IP in any innovations. The appeal was allowed.

Citation
[2024] UKFTT 951
Parties
Appellant: Collins Construction Limited; Respondents: The Commissioners for His Majesty's Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
21 October 2024
Procedural Posture
Corporation Tax Appeal / First Tier Tribunal (tax) Judgment
Outcome
Appeal allowed
Legal Topics
Research and Development Relief, Subsidised Expenditure, Contracted Out Activities, Statutory Interpretation
Tax Law Corporation Tax Research and Development Relief Subsidised Expenditure Contracted Out Activities Statutory Interpretation

Case Brief

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Parties

Collins Construction Limited

Appellant

The Commissioners for His Majesty's Revenue and Customs

Respondents

Procedural Posture

Corporation Tax Appeal / First Tier Tribunal (tax) Judgment

Legal Issues

  1. 1 Whether the expenditure was 'subsidised expenditure' under section 1138 CTA 2009
  2. 2 Whether the expenditure was incurred in carrying on activities contracted out to the company under sections 1052 and 1053 CTA 2009

Ratio Decidendi

The Tribunal held that the expenditure was not 'subsidised expenditure' under section 1138(1)(c) CTA 2009, as the payments made by clients under arm's length commercial contracts for specified works did not amount to meeting the R&D expenditure in the sense required by the statute. There was no clear link between the payments and the specific R&D costs, and the contracts did not require or reimburse R&D. The Tribunal also found that the activities were not contracted out, as there was no contractual requirement for R&D, and Collins undertook the risk and retained IP in any innovations. The appeal was allowed.

Court Disposition

Appeal allowed

Orders

  • Closure notices denying R&D relief for the periods ended 30 June 2018 and 30 June 2019 are set aside
  • Collins Construction Limited is entitled to R&D tax relief for the relevant periods