R&D tax relief •4 min read

Stage One Creative Services Ltd v HMRC

MJ

Matthew Jones ACA CTA

Last reviewed September 2026 · Editorial standards

Tribunal
First-tier Tribunal (Tax Chamber)
Decided
25 November 2024
Judge
Judge Anne Scott and Christopher Jenkins

The company won every issue. A month after Collins Construction, a second tribunal rejected the same two HMRC arguments about subsidy and contracting out — and went further, striking down two discovery assessments because HMRC’s own earlier guidance had established a practice the company had followed. That last finding is the one that matters most in an enquiry.

What was at issue

Stage One Creative Services provides engineering, construction and automation for live events and installations (paragraph 46). Its SME claims for the years ended 31 December 2017, 2018 and 2019 were challenged on four fronts.

Two were the arguments Collins had just defeated: that client payments subsidised the R&D under section 1138, and that the R&D was contracted out to Stage One by its customers.

The other two were about how HMRC had reopened the older years. It had raised discovery assessments for 2017 and 2018 — £248,100.67 of tax plus interest for 2017, £198,971.32 for 2018 — rather than opening enquiries in time. That put two statutory protections in play: whether HMRC could show the officer could not reasonably have been expected to know of the loss of tax from the information given, and whether the returns had been made in accordance with a practice generally prevailing when they were filed.

What the tribunal decided

The appeal was allowed on all four issues. Nothing was decided against the company.

On subsidy: the expenditure “was not subsidised within the meaning of section 1138 CTA 2009” (paragraph 182). On contracting out: the tribunal found the company “do not agree to carry out R&D or seek reimbursement of those costs” (paragraph 166), that “the R&D was a means to an end” which benefited the company itself (paragraph 208), and so the expenditure was not contracted out (paragraph 209).

Then the discovery findings. The tribunal examined how HMRC’s own manual had changed, and found that the newer version “removed those factors and made it clear that only freestanding R&D could qualify” (paragraph 273). Because the older guidance was what advisers and companies had been working to, there was a practice generally prevailing based on it, and Stage One’s returns accorded with that practice (paragraphs 282 to 284). HMRC’s remaining discovery argument failed too. It carried the burden on that issue (paragraph 285) and did not discharge it (paragraph 297).

One qualification the decision itself flags: a closing footnote records that had the first discovery issue been decided by reference to the practice findings, the position would have been different, with a discovery arising after a meeting in November 2020 (paragraphs 298 to 301). It is not a clean win on that limb so much as a win on how HMRC ran it.

What it changes for a claim being prepared now

  • A guidance change is a fact you can argue. Where HMRC has rewritten its manual and then assessed you on the new reading for an old year, the practice generally prevailing point is live. It is a technical argument about paragraph 45 of Schedule 18 FA 1998, and it is the reason two assessments here fell away entirely.
  • Look at how the year was opened, not only at the merits. Discovery assessments carry conditions HMRC has to satisfy, and it carries the burden. A claim that would be hard to defend on the technical merits can still be safe if the year was reopened badly. Our page on what happens if an R&D claim is rejected sets out the routes.
  • R&D as a means to an end still counts. The company was not doing research for its clients; it was solving problems in order to deliver. That was enough. The relief does not require a laboratory.

As with Collins, the subsidy and contracting-out holdings are about the old SME scheme. Periods beginning on or after 1 April 2024 turn on a different statutory test — see contracted-out R&D.

Has it been appealed?

No onward appeal has been reported, and no Upper Tribunal or Court of Appeal decision naming Stage One Creative Services appears on the published record.

HMRC has said, in the Research and Development Communication Forum minutes of 6 May 2025, that it accepts the tribunal’s decisions in this case and Collins Construction and has updated its position and approach. It amended CIRD81650 and CIRD84250 on 27 February 2025. The same minutes record that no retrospective correction mechanism has been created for companies that followed the earlier position.

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.