Software development company wins R&D case against HMRC (Get Onbord Ltd vs HMRC)

Case Law is crucial in Tax, enabling advisors and tax payers alike to know how laws are interpreted. This is especially useful in R&D Tax Relief where there are few historical cases to refer to. The recent case of “Get Onbord Ltd vs HMRC” although only in the First Tier Tribunal (FTT), gives us more insight into what is expected for claims.

This article will look at the history of R&D with software development claims, what this case focused on, and what it means for other software development claimants.

?History of Software Dev and HMRC

In the past, software claims with the need to write new code was considered by HMRC to be qualifying R&D, the concept being that if the concept required building from scratch it would likely be an advance in technology. This broad interpretation indicated a lack of industry-specific knowledge.

Current status

In more recent times HMRC increased their level of checks and enquiries and seem to have changed their position almost entirely in relation to software R&D. Their newly appointed Chief Digital and Information Officer (CDIO) has made inaccurate statements to say that anything using existing code language does not qualify for R&D.

While efforts to eliminate claims solely based on existing technologies are justified, the unfortunate result of this approach is that eligible claims from innovative companies have being wrongly rejected.?

Case Focus

The "Get Onbord Ltd vs HMRC" case revolved around two key questions:

• Did they have a Competent Professional?
• Who bears the burden of proof?

Mr. Cahill, a "Model and Risk Expert," despite not being a coder by title, had extensive coding experience and market knowledge. The court recognised him as a Competent Professional due to his understanding of the project's technical needs and the market’s capabilities.

By validating Mr. Cahill’s expertise, his testimony supported the claim's adherence to guidelines. He demonstrated that a mix of existing and new code achieved significant advancements, arguing that excluding all existing code would disqualify all software projects from R&D relief, reducing them to routine activities.

The case emphasised that once a claimant provides substantial evidence, HMRC must then present counter-evidence if they wish to dispute the claim. HMRC's insufficient counter-arguments in this case highlighted the importance of shifting the evidential burden from the company to HMRC.

Key Takeaways

• Experience (not qualifications) can define a Competent Professional.
• Using existing code does qualify for R&D if the outcome to the project is uncertain.
• Once evidence has been provided, HMRC must substantiate their objections by providing detailed evidence.

What this means for claimants

Identifying your team member with relevant experience as a Competent Professional strengthens your R&D claims.

While this case sets a positive example, it is a First Tier Tribunal decision and not legally binding. HMRC is unlikely to appeal, as a loss could require them to apply these findings to all claims. However, this case can still support your claim rationale and you should refer to it if appropriate when liaising with HMRC.

If you need assistance with any aspect of an R&D Tax Claim, whether it's project qualification or full claim preparation and submission, book a call with our R&D Tax Manager Stephanie Watson via this link.

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