R&D tax relief •5 min read

Flame Tree Publishing Ltd v HMRC

MJ

Matthew Jones ACA CTA

Last reviewed September 2026 · Editorial standards

Tribunal
First-tier Tribunal (Tax Chamber)
Decided
25 April 2024
Judge
Judge Anne Redston and Mr Michael Bell

A publisher claimed £266,644 of enhanced R&D expenditure for digitising its back catalogue. The appeal was dismissed on two independent grounds: nobody put forward as a competent professional was qualified in software or computing, and the costs claimed were never evidenced. Either ground alone would have sunk it.

What was at issue

Flame Tree Publishing is a music and art publisher. For the year ended 30 June 2018 it claimed SME R&D relief on work to digitise its archive and turn it into a curated, searchable online resource — an enhanced deduction of £266,644, worth £50,662 off its corporation tax bill. It filed the claim by amended return in June 2020; HMRC issued a closure notice refusing it in July 2022.

Three questions reached the tribunal. Was this one project or the seven the claim had described? Did the people relied on count as competent professionals in the relevant field? And was there evidence that the money claimed had actually been spent on the work? A fourth fact ran underneath all of it: the programming and the search engine were built by an outside supplier, whose costs were never in the claim at all.

What the tribunal decided

HMRC won, on every point.

The claim described seven projects; at the hearing the company argued it had really been one. The tribunal found one project (paragraph 55) — no start or end dates had ever been given for the seven, no costs had ever been allocated between them, and the company had told HMRC there were no specific documents about any of them (paragraph 54). It added that seven projects would not have saved the claim either (paragraph 79).

The competent professional point is the one that did the work. The founder was found to be a competent professional in publishing, and a colleague in digital archiving. Neither was one in software, programming or computing — the field the claimed advance sat in — and the same was true of the ten other employees and a subcontractor relied on (paragraph 68). Without that, the claim failed the Guidelines outright (paragraph 69).

The costs failed separately, and are dealt with below. Separately again, the outside supplier’s work could not be brought into the claim at all: the claim had been made under the in-house route in section 1052 CTA 2009, which excludes contracted-out activities, and no claim was ever made under section 1053 (paragraph 81).

The findings that did the damage

Two passages are worth reading if you prepare claims.

On the people: the tribunal adopted HMRC’s formulation that a competent professional must have appropriate qualifications, experience and up-to-date knowledge of the relevant scientific or technological principles, and said it had “no hesitation in agreeing with HMRC” (paragraphs 66 and 68). Expertise in the company’s trade is not expertise in the field the advance is claimed in. The founder knew publishing; the advance was said to be in software.

On the money: “there is no evidential basis for the quantum of any of the employee costs claimed” (paragraph 73). There was no time recording. The percentages had been agreed in discussion with the adviser, who had not worked on the project. One witness had no recollection of the time he had spent. A 1.5% slice of cost of sales carried “no explanation … for that percentage” (paragraph 75). The tribunal refused the appeal “for the additional reason that it has failed to prove that the sums claimed were spent on the Project” (paragraph 76).

That second ground is the one advisers under-rate. A claim can clear every technical test and still be refused because nobody can show where the numbers came from.

What it changes for a claim being prepared now

Four things follow, and all four are cheap now and impossible at a hearing.

  • Name the field first, then find the person. If the advance is in software, the competent professional must be qualified and current in software. A director who has run the business for decades is a competent professional in the business, which is not the same thing and will not be treated as if it were.
  • Record time while the work happens. Percentages reconstructed two years later, in a meeting with an adviser who was not there, are not evidence. Timesheets, sprint records, project codes in the payroll — anything contemporaneous beats anything remembered.
  • Explain every apportionment in writing. A figure with no stated basis is a figure the tribunal will not accept, however reasonable it looks.
  • Check which statutory route the claim is on. Work done by an outside supplier is not in-house R&D. Claiming it under the wrong section does not get corrected at the hearing — it is simply lost.

Our page on who counts as a competent professional takes the first point further, and the records a claim needs covers the second and third.

Has it been appealed?

No onward appeal has been reported. A search of the published judgment record turns up no Upper Tribunal decision in the case, and later tribunals continue to cite it as it stands — Tanglewood Care Services applied it in August 2026. Applications for permission to appeal are not published, so absence of a reported appeal is not proof that none was sought.

The decision is First-tier Tribunal, so it binds only the parties and sets no precedent. Its weight is practical: it is the decision HMRC officers and later tribunals reach for on what a competent professional has to be qualified in.

Sources

First-tier Tribunal decisions bind only the parties to them and set no precedent. This entry describes the decision as it stood at the review date above, as general information rather than advice on your circumstances — see our terms. For an answer on your own facts, talk to us.