TaxCorporate TaxBE stung by R&D ruling

BE stung by R&D ruling

Company claims 'groudbreaking' work meant tax credits were legitimate

The company at the centre of a £150k row over R&D tax credits has denied
that its claim for the reliefs should have been disallowed.

A High Court judge last week sparked controversy when he concluded that BE
Studios received R&D tax credits totalling £151,862 in error, as part of a
ruling on a failed negligence action BE had itself launched against Smith &
Williamson, the top 10 accountancy firm.

‘The judge was unable to understand the technology that the company was
producing at that time,’ Peter Hyde, BE’s company secretary, told
Accountancy Age this week.

Hyde stressed that BE had been engaged in producing new technology to enable
the internet-based work BE was involved in, adding that the work it had been
doing was ‘groundbreaking’.

BE is unhappy that it was unable to convey this to the judge. The company
might appeal the judge’s decision, Hyde said, but would not be able to produce
any new evidence, necessary to prove that point, in an appeal.

‘Should the government and the Revenue ask for the evidence we can give them
that evidence,’ Hyde said in answer to the suggestion that HM Revenue &
Customs might ask for the money back.

The Revenue seems likely to enquire into the award of the credits, especially
as the judge, Mr Justice Evans Lombe, concluded that had enquiries been made
initially by the Revenue, ‘the claims for R&D tax relief made by BES should
have been rejected in full.’ But it is not clear to what extent BE would be able
to meet any clawback of the credits, as it was ‘mothballed’ at the end of 2001.

Hyde said the question of whether BE would be able to repay was ‘academic,’
since BE had deserved the credits anyway.

Christopher Dickens, a BE shareholder and director, was named as jointly
liable for any costs the firm may have to pay to Smith & Williamson, which
are still to be determined.

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