In the case of Tanglewood Care Services Ltd v HMRC [2026] UKFTT 1137 (TC), the FTT has dismissed the appeal against a closure notice denying a claim for enhanced expenditure on research and development (R&D). The FTT agreed with HMRC that the expenditure did not meet the criteria (as specified in the BEIS Guidelines) to qualify as R&D.
CORPORATION TAX – research and development – whether the tests in the BEIS Guidelines had been met – appeal dismissed
The Appellant, which operates residential care homes, had claimed relief on expenditure on a project to optimise its response to the Covid-19 pandemic, the FTT summarising the project as follows:
“The Appellant contends that the project involved developing a novel system comprising numerous measures including extensive PPE use, testing regimes, visitor restrictions, cohorting of residents, enhanced cleaning procedures, social distancing arrangements, staff segregation, track and trace systems and vaccination programmes.”
The FTT focused on the guidelines provisions of (i) the requirement for an advance in science or technology, (ii) scientific or technological uncertainty, (iii) system uncertainty and (iv) the role of the competent professional. The FTT accepted that there was a project “to minimise the transmission and effects of Covid-19 within the Appellant’s care homes whilst maintaining resident welfare and continuity of care” but did not accept that the project “sought an advance in science or technology within the meaning of paragraphs 3 and 6 of the Guidelines”, noting that:
“The difficulty for the Appellant is that the evidence does not establish that the project sought to achieve an advance in overall knowledge or capability in a field of science or technology. The objective was to determine how best to deploy, balance and manage infection-control measures within the Appellant’s own care homes so as to protect residents and maintain continuity of care. Although that involved the adaptation and refinement of numerous measures, the evidence does not show that those activities were directed towards achieving an advance in overall knowledge or capability beyond the Appellant’s own operations. Rather, they were directed towards the practical management of an unprecedented operational challenge.”
In terms of uncertainty, the FTT concluded that:
“We are not satisfied on the evidence that the uncertainties relied upon by the Appellant were scientific or technological uncertainties of the type contemplated by paragraphs 13 and 14. Most concerned matters such as staffing arrangements, visitor policies, admissions, resident wellbeing, procurement of PPE, compliance procedures and the practical operation of care homes during a public-health emergency. Those were real and difficult problems, but they were predominantly operational and managerial in character.”
With regards to the role of competent professionals, the FTT accepted that the Appellant’s staff had “significant expertise” in the care sector and had “substantial experience in the ownership, management and operation of care homes” but “none of those witnesses claimed expertise in virology, epidemiology, infectious disease transmission, infection science or any other scientific or technological discipline capable of assisting the Tribunal as to the relevant state of knowledge or capability in the field.” This left the FTT “without sufficient evidence as to whether the alleged uncertainties were scientific or technological uncertainties, whether they were readily deducible by a competent professional, or whether the activities sought an advance in overall knowledge or capability beyond the Appellant’s own operations.”
Overall, the FTT concluded that:
“The Appellant was engaged in developing and implementing an evolving package of measures intended to protect highly vulnerable residents during an unprecedented public-health emergency. Those measures were reviewed and refined over time and involved considerable judgement, ingenuity and commitment. We also accept that the Guidelines are capable, in principle, of extending to projects involving system uncertainty arising from the interaction of known measures and processes.
However, for the reasons set out above, the Appellant has not established that it was conducting a project directed at resolving scientific or technological uncertainty so as to achieve an advance in overall knowledge or capability in a field of science or technology. The evidence demonstrates operational decision-making, risk management and the adaptation of existing knowledge and guidance to the particular circumstances of the Appellant’s care homes. It does not demonstrate research and development within the meaning of the Guidelines.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/1137
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