Cracks show in R&D scheme

The judge who listened to BE’s negligence suit against Smith & Williamson indicated in no uncertain terms that he thought BE did not deserve them.

BE, he said, had demonstrated no evidence that what it was doing was technologically innovative, and the Revenue should have rejected the claim.

On the other hand, BE now contends that it has extra evidence, now, of course, no longer admissible in court, which could be adduced to show that it did deserve the credits. The work it was doing, it says, was ‘groundbreaking.’

On the one side, you have the evidence from the court, some of which shows a misunderstanding of the credits.

In one particular case, an employee of BE said that she had been working on a 1920s series. The research lay, she said, in researching the costumes for the series. Even to a layman, that doesn’t sound much like technologically innovative R&D.

On the other, it may be that BE was doing something innovative. The internet was not so fully developed then, and it is now difficult to assess the technological ‘uncertainties’ involved in BE’s work that it was trying to resolve.

However, it does seem as if the case should not have been brought. Not only were other aspects of the claim rejected, implying that this was a weak case altogether, the case should not have been brought in the main because the uncertainty around tax credits revealed by this case should simply not exist.

It has been contended before that R&D cash has been misdirected because tax inspectors did not know what was R&D and what wasn’t. Neither, it seems from the BE case, did some companies and their advisers, in this case LF Consulting (Smith & Williamson, it must be said, seem blameless in the most part).

Should the Revenue instigate some kind of review of procedures? That is for ministers to decide. Even so, taxpayers are entitled to ask, just how much of the £450m lavished on R&D last year was well spent.

Alex Hawkes edits the tax page