Stage One Creative Services Ltd v Commissioners for His Majesty's Revenue and Customs (CORPORATION TAX - relief for expenditure on research and development - Part 13 Corporation Tax Act 2009) [2024] UKFTT 1059 (TC) (25 November 2023)

Stage One Creative Services Ltd v Commissioners for His Majesty's Revenue and Customs (CORPORATION TAX - relief for expenditure on research and development - Part 13 Corporation Tax Act 2009) [2024] UKFTT 1059 (TC) (25 November 2023)

SOCS' R&D expenditure was not subsidised nor incurred in carrying on activities contracted out by clients. The contractual arrangements did not transfer the risk or autonomy of R&D to the clients, and payments received were not direct subsidies for R&D. The discovery assessments for 2017 and 2018 were invalid as HMRC officers could reasonably have been expected to be aware of the situation based on information available, and SOCS' returns were made in accordance with practice generally prevailing at the time.

Citation
[2024] UKFTT 1059
Parties
Appellant: Stage One Creative Services Ltd; Respondents: The Commissioners for His Majesty's Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
25 November 2023
Procedural Posture
Tax Appeal / First Tier Tribunal Judgment
Legal Topics
Research and Development Relief, SME Scheme, Discovery Assessments, Subsidised Expenditure, Contracted Out Activities
Tax Law Corporation Tax Research and Development Relief SME Scheme Discovery Assessments Subsidised Expenditure Contracted Out Activities

Case Brief

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Parties

Stage One Creative Services Ltd

Appellant

The Commissioners for His Majesty's Revenue and Customs

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal Judgment

Legal Issues

  1. 1 Whether SOCS' R&D expenditure was 'subsidised' within section 1138 CTA 2009
  2. 2 Whether SOCS' R&D expenditure was incurred in 'carrying on activities which are contracted out' within sections 1052(5) and 1053(4) CTA 2009
  3. 3 Whether HMRC's discovery assessments for 2017 and 2018 were valid under Schedule 18 Finance Act 1998

Ratio Decidendi

SOCS' R&D expenditure was not subsidised nor incurred in carrying on activities contracted out by clients. The contractual arrangements did not transfer the risk or autonomy of R&D to the clients, and payments received were not direct subsidies for R&D. The discovery assessments for 2017 and 2018 were invalid as HMRC officers could reasonably have been expected to be aware of the situation based on information available, and SOCS' returns were made in accordance with practice generally prevailing at the time.