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

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

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

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

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