The appellant company (M) claimed research and development (R&D) tax deductions at the rate applicable to a ‘small or medium-sized enterprise’ (SME) (as defined in CTA 2009, s 1119(1)) for its accounting periods ended 30 September 2010 and 30 September 2011 respectively (under CTA 2009, s 1044).
43.75% of the ordinary shares and 26.22% of the voting rights of M were held by a company (W), which was a 100% subsidiary of Royal Bank of Scotland (RBS) at the relevant time, as the result of an earlier ‘debt for equity swap’.
Following enquiries by HM Revenue and Customs (HMRC), closure notices were issued determining that M was not entitled to the R&D relief claimed, as W was a ‘partner enterprise’, which was neither an institutional investor nor a venture capital company, so that M could not be treated as qualifying for relief as an SME. M appealed.
The First
