Beer Express Ltd v HMRC

The FTT dismissed the appeal.

The Tribunal accepted Mr Narang as a truthful and credible witness who did his best to assist. However, the difficulty for Beer Express was that he did not have in-depth knowledge of the projects and could not be deemed as a competent professional. He had overseen them and had a commercial vision for the business, but he was not responsible for the design, creation, planning and implementation of the projects in a way that could satisfy the competent professional test. (Similar principle to Tills Plus)

The FTT agreed that the Guidelines do not require a competent professional to have a formal designation or specific qualification.

However, that did not remove the need for evidence from someone who could explain the existing baseline of technology or science, what advance was being sought, what uncertainty existed and why that uncertainty could not readily be resolved by a competent professional. That evidence was missing.

Mr Shivam was the only individual specifically identified as potentially having software expertise in relation to the software projects. He was not called to give evidence and no longer connected to the business. There was also no evidence from the author of the RDT Active reports and no clear evidence as to who had contributed to those reports, what their involvement was or whether they could be treated as competent professionals.

The Tribunal found that the reports prepared for the claims were vague and loosely termed. They contained assertions that the projects met the R&D requirements, but those assertions were not supported by clear evidence from anyone with contemporaneous involvement in the projects or the necessary technical knowledge.

The same issue ran through all four projects. There was no competent professional evidence, no clear baseline of existing knowledge, no proper documentary evidence of a plan and no detailed explanation of the uncertainties or how the work was designed to resolve them.

The appeal was dismissed.

This case is another reminder that R&D tax relief claims cannot rely on broad statements that a project was bespoke, complex, innovative or commercially useful.

The FTT is looking for evidence that shows what the scientific or technological advance was, what uncertainty stood in the way and why that uncertainty could not readily be resolved by a competent professional. Without that, the claim does not get very far.

The case is also a useful reminder that software projects need real technical evidence. Saying that a system used AI, forecasting, algorithms or integration is not enough. The Tribunal needs to understand what was technically difficult, what was already available and why the work went beyond routine adaptation of existing technology.

The same point applies to product development. A new beer, a new flavour, different packaging or changes to distribution may be commercially sensible, but that does not make the work R&D. There needs to be a scientific or technological advance, not just a new product for the business.

The most uncomfortable part of this decision is the role of the advisor. Beer Express appears to have relied heavily on RDT Active, but when HMRC challenged the claim, the business was left trying to defend reports that it could not properly evidence. That is a very difficult place to be.

Businesses need to know who their competent professionals are at the time the claim is made. They also need to be able to explain why those people are competent, what they did, what documents support the work and how the claim has been put together. This also makes the case even stronger for real time capture of project information so the people involved in the project at the time can be relied upon even if they have left the business years later.