Hadee Engineering Co Ltd v Revenue & Customs [2020] UKFTT 497 (TC)

Hadee Engineering Co filed for R&D tax credits for the 2009 and 2010 tax years. These claims were denied by the HMRC. Naturally, Hadee Engineering appealed this decision. The claims were made under the SME scheme, claiming enhanced expenditure of 75%. The claims were made on 7 projects plus general R&D. 

Hadee Engineering develops innovative engineering products for mining, tunnelling, sub sea, centrifugal casting machines and billet handling. It’s no surprise then, that their 7 projects were as follows:

  1. Marine Gear Welding
  2. Double Deck Loader
  3. Hollow Ingot Manipulator
  4. Trombone Walkway Gantry
  5. 5,000 Tonne Manipulator Track
  6. Tilting Wash Down Syndrome
  7. Animal Centrifuge
Basic Facts and Relevant Law

The HMRC initially rejected 6 out of 7 projects, with just a partial acceptance of the 7th. The HMRC requested proof from Hadee Engineering to support the assertions made by their competent professional (the taxpayer in this case). They specifically requested documentary evidence that should hopefully be catalogued and historically retained. They further requested details on the qualification of the Competent Professional. The HMRC needs to see that somebody central to the R&D has the right qualification, knowledge and experience in their field of science or technology to assess what is eligible as R&D – and what is common knowledge.

  • Paragraph 21 of Schedule 18 to the Finance Act 1998 provides that a company may be required to deliver tax returns for any period and therefore must retain that information for 7 years. 
  • Corporation Tax Act 2009: outlines provisions governing R&D relief, which must be met to receive this tax relief. 

In response, Hadee Engineering asserted they did not have further records to produce and therefore could not meet HMRC’s request for further documentation. Upon further review of the available documentation, including subcontractor payments – HMRC asserted that since much of the work was subcontracted out, the contractors would be the competent professional who could speak to the projects, rather than the managing partner.

Court Decision

The First-tier Tribunal (FTT) agreed with the HMRC and rejected 6 out of 7 projects. They stated the company failed to provide the required proof and substantive documentation. They further stated that claiming yourself as the Competent Professional is not enough, and you need to find the best Competent Professional.

This particular decision is not final, as an appeal against his decision has been granted, and the case will be escalated to the Upper Tribunal.


Ultimately this case came down to good governance and record keeping. Claimants need an auditable methodology for review. A second point to note is that multiple projects might need multiple experts – and expecting to pull up a single Competent Professional may not suffice.

The decision reinforces the two key phases of an R&D claim : understanding how the R&D work meets the eligibility criteria and ensuring conditions are met and supported with good record keeping. 

Who We Are:

Swanson Reed is one of the UK’s leading R&D Tax Relief consultancies. We manage all facets of the SR&ED tax credit program, from claim preparation and audit compliance to claim disputes.

If you would like to find out more about how your business could benefit from R&D Tax Credit, contact a Swanson Reed R&D Tax Advisor today.