R&D tax relief •10 min read

Strictly Money Ltd v HMRC

MJ

Matthew Jones ACA CTA

Last reviewed September 2026 · Editorial standards

Tribunal
First-tier Tribunal (Tax Chamber)
Decided
20 September 2024
Judge
Judge Zachary Citron

HMRC won, and the R&D questions were never reached. A company claiming an R&D tax credit of £442,004.23 lost on two grounds. Its main activity was an early-stage business idea rather than a trade. And the £1.4 million said to have been paid to a consultant for contracted-out R&D was not incurred for the purposes of any trade it did carry on. It is useful to early-stage claimants for an unwelcome reason: it shows the two places the statute stops a claim before anyone looks at the science — the trading condition and section 54 CTA 2009.

What was at issue

Strictly Money Limited was a small company with a single director and shareholder, found to be its controlling mind (paragraph 12). The accounting period ran from 1 June 2016 to 31 May 2017. The audited accounts showed turnover of about £30,000, administrative expenses of just over £2 million, and net liabilities at the period end of just under £624,000 (paragraphs 13 and 14); the company had no bank account at all during the period (paragraph 17). The tribunal summarised the business concept as one that might be captured in a single phrase — a “blockchain-enabled securities trading platform for retail traders and trackers” (paragraph 31).

The return claimed a trading loss of £2,050,958, carrying an additional deduction under section 1044 CTA 2009 of £1,772,955. That was 130% of £1,325,350, itself 65% of £2,039,000 of claimed subcontractor payments under section 1136 (paragraphs 3 and 4). It also claimed an R&D tax credit under section 1054 of £442,004.23 (paragraph 5). The claimed payments were £1.4 million to an individual consultant for services between July 2014 and January 2017; £500,000 to three unnamed consultants; £100,000 for “concept development services”; and £39,000 to Burderop Bridge Limited (paragraph 4).

HMRC’s closure notice disallowed the whole £2,039,000 and removed the credit (paragraph 6). At the hearing the company conceded the £500,000 and the £100,000, leaving £1,439,000 in dispute (paragraph 7).

How the dispute got to a hearing

The decision does not record when HMRC opened its enquiry or the date of the closure notice, and no review is mentioned. What it does date is the correspondence. The company’s chief architect, later a director, produced a document on 10 June 2019 answering HMRC’s questions during the enquiry (paragraph 19(7)), and three supporting statements were obtained in July 2019 (paragraph 21). The appeal reference, TC/2022/02573, places the notice of appeal in 2022. In December 2022, in response to those enquiries, the director executed a declaration of trust over 1.1 million shares in the consultant’s favour, expressed as the position since February 2017 (paragraphs 19(4) and 33(1)).

The appeal was heard at Taylor House, London EC1 on 23, 24 and 25 July 2024 before Judge Zachary Citron, sitting alone. About 24 hours after the hearing ended, the company applied to admit two further documents found that day. HMRC responded on 1 August 2024, and the application was refused as “closer to the extreme end of the spectrum of non-compliance” with the tribunal’s directions (paragraphs 23, 27(5) and 28). The decision was released on 20 September 2024.

What each side argued

HMRC’s case was short and structural: the answer to all three statutory questions was no. The company was not carrying on a trade; the £1,439,000 was not allowable as a deduction in calculating the profits of a trade; and it was not qualifying expenditure on contracted-out R&D. HMRC went further — if there was no trade at all, the company had been undercharged (paragraph 36). It did not argue that the company’s own £30,000 sales invoice was a sham (paragraph 34).

The company argued that the answer to each question was yes (paragraph 36). Its evidence came from its chief architect, who gave a witness statement and oral evidence. On the absence of the two people who mattered, he said the director would have found attending stressful and that the consultant had been approached and had refused without giving a reason (paragraph 20(4)).

It also relied on the three July 2019 statements, made on the work as the chief architect had described it. One signatory adopted a form of words supplied to him by the chief architect. He confirmed his opinion “as a independent, competent professional working in the field of investment, trading and blockchain technology” that the work “appears to have overcome technological uncertainty” (paragraph 21(2)). The same document stated that this was something “I am not able to verify directly (as I was not part of the R&D team) but which I believe to be true” (paragraph 21(2)). None of the three attended to give oral evidence (paragraph 22).

The provision the case turns on

Two provisions did the work, and neither is about science. Section 1044 CTA 2009, in the version in force at 31 May 2017, set the gateway conditions: “(4) Condition C is that the company carries on a trade in the period. (5) Condition D is that the company has qualifying Chapter 2 expenditure which is allowable as a deduction in calculating for corporation tax purposes the profits of the trade for the period.”

Whether expenditure is allowable at all is answered outside Part 13. Section 54(1) CTA 2009 provides: “In calculating the profits of a trade, no deduction is allowed for— (a) expenses not incurred wholly and exclusively for the purposes of the trade, or (b) losses not connected with or arising out of the trade.”

The claim route itself was section 1053, whose Condition A required the expenditure to be “attributable to relevant research and development undertaken on behalf of the company”.

What the tribunal decided

The tribunal worked forward from the facts, and the facts decided it.

It first disposed of what it could not do. Under section 50 TMA 1970 its role was to decide whether the amended assessment overcharged or undercharged the company, and the burden was on the company (paragraph 29). It followed that “the way in which HMRC conducted their enquiries (such as, whether there were delays, and whose fault they were) is not something which engages the powers or role of the Tribunal” (paragraph 30). HMRC having left a materially similar claim for the preceding period unchallenged had no bearing either (paragraph 30).

On the evidence, the tribunal found the witness straightforward but second-hand. He had no first-hand knowledge of the arrangements with the consultant, who is not mentioned in the contemporaneous business documents, and neither the director nor the consultant gave evidence. The assertions could not be tested fairly: the witness “was not there” and was, in the judge’s words, “if not outright speculating, then adopting the views and observations (as he understood them)” of the director, “conveyed to him orally” (paragraph 20(5)).

It then found that the consultant had probably done no meaningful work for the company in the period (paragraph 33). The only contemporaneous evidence of his involvement was a set of February 2017 legal steps — two convertible loans, a conversion, and an immediate renunciation of the resulting shares in the director’s favour — resting on an asset purchase agreement of which the company had no copy. The tribunal found that “the appellant kept no record of the ‘asset’ purchased (or any other written record of [the consultant’s] work); and [the consultant’s] conduct is not that of a reasonable person expecting payment for (meaningful) work done” (paragraph 33(1)).

Three conclusions followed. The main activity was not a trade: it “was an attempt to get a technology-based entrepreneurial business off the ground, in business terms; it was nowhere near commercial viability. It was not, therefore, the carrying on of a trade” (paragraph 37). The company was trading, but only through a £30,000 consulting engagement that was a “sideline”, in substance unrelated to the main activity (paragraph 38). And the disputed expenditure was not for that sideline trade: the £1.4 million failed section 54 because, “viewed realistically, [it] was not for any business purpose” (paragraph 39), and the £39,000 was incurred entirely for the main activity, which was not a trade (paragraph 40).

That disposed of the appeal without reaching the R&D tests. The tribunal added that the consultant’s work “did not amount to research and development undertaken on behalf of the appellant company” in any event, and that the company had rightly not argued the Burderop Bridge consultancy was contracted-out R&D (paragraph 41). The appeal was dismissed and the amended assessment stood good (paragraph 42).

What it changes for a claim being prepared now

The trading condition did not go with the old scheme. Section 1044 CTA 2009 today, as the ERIS route for R&D-intensive loss-making SMEs, still reads “Condition C is that the company carries on a trade in the period”. It still requires expenditure “allowable as a deduction in calculating for corporation tax purposes the profits of the trade”. Section 1042B says the same for the merged scheme. The current schemes apply to accounting periods beginning on or after 1 April 2024; which of the two applies is decided by the company’s R&D intensity, not by the period’s start date. Under either, a company that has not begun to trade has nothing for the relief to attach to.

  • Settle the trading question before the technical narrative. Pre-revenue is not pre-trading, and what the tribunal looked for was commercial viability, not turnover. Record the date the trade began and what marked it: the first customer contract, the first supply, the operating infrastructure.
  • Tie every claimed cost to the trade you are actually carrying on. Strictly Money had a trade — the consulting sideline — and lost anyway, because the money had been spent on something else. Section 54 applies to every deduction in every scheme.
  • Paper the arrangement at the time, not in response to an enquiry. A declaration of trust executed in 2022 to regularise a 2017 position did the company no good, and neither did an asset purchase agreement it could not produce.
  • Put the person who did the work in front of the tribunal. Both people who knew were absent; everything else was untested hearsay.

A worked illustration on the last of those. The attestation relied on here is the one not to replicate: drafted by the director for a signatory who calls himself an independent competent professional and, in the same breath, says he could not verify the work because he was not part of the team. The statement that carries weight is the opposite shape — written by the person who held the technical responsibility, naming the field, stating what was publicly available at the start, what could not be deduced from it, and what was done about that. Our page on who counts as a competent professional sets out the test; the records a claim needs covers the rest.

Where it sits against the other decisions

Strictly Money sits in front of the cases the register mostly turns on. Flame Tree Publishing and Hadee Engineering fail claims on the competent professional and on quantum; this one fails a step earlier, on whether there is a trade to deduct from at all. On the attestation point it belongs with the same line — Flame Tree and AHK Recruitment, and the later decisions applying both.

Paragraph 30 is also the clearest statement that HMRC leaving a similar claim for an earlier period unchallenged decides nothing about the period in dispute — the point most often misunderstood by companies whose first claim was paid without question. See does HMRC paying my claim mean it was approved?

Has it been appealed?

No onward appeal has been reported, and no Upper Tribunal decision naming Strictly Money appears on the published record. Applications for permission to appeal are not consistently published, so the absence of a reported appeal is not proof that none was sought.

HMRC has not changed its published guidance as a result. Nothing in the CIRD manual’s dated change log is attributed to it, no Research and Development Communication Forum minutes discuss it, and no Revenue and Customs Brief names it. That is a positive finding rather than a gap: the decision applied settled law about trading and deductibility to a set of facts.

The decision is First-tier Tribunal, so it binds only the parties and sets no precedent. Its weight is practical: it is the clearest published illustration of an R&D claim failing before the science, on the trade and on what the expenditure was for, and of a competent-professional attestation that carried no weight because of how it was produced. It sits with the rest of the R&D tax case-law register, one page per decision.

Sources

  • Strictly Money Ltd v HMRC — the decision, cited as [2024] UKFTT 866 (TC), case number TC09296, appeal reference TC/2022/02573, heard 23–25 July 2024, released 20 September 2024. Every paragraph number above refers to it.
  • Section 1044 and section 1053 CTA 2009 — the additional deduction with its Conditions C and D, and contracted-out R&D, both as in force at 31 May 2017.
  • Section 54 CTA 2009 — expenses not wholly and exclusively for the trade; latest available revised version, in force since 1 April 2009.
  • Section 1042B CTA 2009 — merged scheme entitlement, for periods beginning on or after 1 April 2024; and section 1044 as it now stands, the ERIS deduction, which keeps Conditions C and D in the same words.
  • Guidelines on the meaning of R&D for tax purposes — the competent professional at paragraphs 13, 20 and 23, and the definitions the tribunal would have applied had it reached them.

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.