Pyreos Ltd, a manufacturer of mini, rugged, pyroelectric, mid-infrared sensors and detectors, made claims for tax relief for the 2010 and 2012 tax years. With the claim being made under section 1119, CTA 2009, they relied on Pyreos being an autonomous SME. 

Because of this, the Commission Recommendation (EC) sought to look at the composition of the shareholdings as evidentiary support for this status as an autonomous SME. During those tax years, Siemens Technology Accelerator GmbH owned between 49% and 36% of the issued share capital. Under the EC recommendation, these two companies would be considered “Partner Enterprises” (the rule applies to any company that owns 25% of the share capital). A Partner Enterprise is inherently not an autonomous SME. 

However, the EC does hold that a company could still qualify as autonomous despite exceeding this threshold as long as the excess is made from investors including venture capital companies (VCC). With this loophole, the FTT had to decide if Siemens was a VCC. The EC does not explicitly define a VCC and therefore FTT fell back on the dictionary definition. Overall, the FTT was of the view that a VCC’s interest in such a company was “in the balance sheet value and revenue generation of its investments, and the ability to realise these.” Ultimately FTT determined that Siemens would be considered a VCC in this instance thereby allowing Pyreos to be considered autonomous.

Allowing Pyreos to be considered an autonomous SME confirms that it was indeed entitled to the tax relief sought by virtue of its R&D expenditure. The company’s appeal was therefore allowed. 


Seeing a win like this in the tax court is great news for R&D claimants. Pyreos surpassed the 25% threshold by a long shot so having some new precedent to help guide our understanding of the FTT’s views on VCCs could encourage more claimants. Those facing claim denials can now better prepare their appeals and support their claims.


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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