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Expenditure was not an allowable deduction and not qualifying R&D expenditure

By Arthur Weller, December 2024

The appellant company was carrying on a trade, but expenditure was not allowable as a deduction in calculating the profits of the appellant company’s trade and was not qualifying expenditure on contracted-out research and development. 

During the period 1 June 2016 to 31 May 2017, the appellant company: (1) received income (turnover) of about £30,000; and (2) incurred administrative expenses of just over £2m. The appellant’s tax return showed a trading loss for the period of £2,050,958. This was: (1) the loss for the year as shown in the appellant’s audited accounts, augmented by: (2) an additional research and development (R&D) relief deduction claimed under CTA 2009, s 1044 of £1,772,955 (derived by multiplying £1,325,350 by 130%). The figure of £1,325,350 was itself derived by applying 65% (per CTA 2009, s 1136, the ‘qualifying element’ of what the appellant company considered to be-

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