In Gas Recovery and Recycle Ltd v HMRC [2016] TC05473 the First Tier Tribunal (FTT) despite making a different interpretation of the rules to HMRC denied a claim for R&D relief: expenditure was not paid for until after the claim was made. 

  • Gas Recovery and Recycle Ltd (GRRL) included £1,112,434 of subcontractor costs in intangible fixed assets during the year ended 31 March 2013.
  • GRRL filed its corporation tax return, including an R&D claim in respect of the subcontractor costs, on 12 March 2014.
  • No payments were made to the contractor until a part payment in February 2015.  Further payments were made in 2016.
  • HMRC rejected the R&D claim on the grounds that payment had not been made at the time that the claim was submitted to HMRC.

GRRL argued that:

  • It was not necessary for the payment to have been made when the claim was made, the claim could be made before payment but would not be accepted by HMRC until after payment.
  • The wording of HMRC’s Corporate Intangibles Research and Development Manual CIRM82100 supported this view.

The First Tier Tribunal:

  • Agreed with HMRC that expenditure must be paid before a claim can be made.
  • Suggested that had GRRL notified HMRC that they had made a payment before 31 March 2015 then this would have been a valid amendment to the claim.
  • As no notification was made by that deadline no claim can now be made in respect of the February 2015 part payment.

The appeal was dismissed


In considering its decision the FTT disagreed with HMRC’s interpretation but reached the same conclusion using both interpretations. It remains to be seen whether HMRC will change its guidance as a result of this case. 


Research & Development Relief (freeview)

Research & Development Relief (subscriber guide)

Research & Development Relief: staff costs & subcontractors

Research & Development Relief: software

Case reference: Gas Recovery and Recycle Ltd v HMRC [2016] UKFTT TC05473