LR R&D LLP v The Commissioners for HMRC
Decision date: 28 February 2025
Neutral citation: [2025] UKFTT 245 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
LR R&D LLP appealed HMRC’s disallowance of partnership losses and R&D relief after paying c.£8m under an R&D Framework Agreement; the First-tier Tribunal found the LLP’s activities were, on balance, investment rather than a trade and dismissed the appeal. The tribunal also said that, had the LLP been trading, it would have been with a view to profit but the R&D payments were not incurred wholly and exclusively for the LLP’s trade (dual purpose) and so were not deductible; HMRC’s closure notices were upheld.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
The tribunal emphasised that whether an activity amounts to a “trade” requires standing back and assessing the whole picture and the traditional badges of trade, focusing on the taxpayer’s own activities rather than those of related parties; on the facts here the LLP’s conduct pointed to investment not trade. The decision also indicates that a limited‑recourse loan, by itself, is not a subsidy for the purposes of condition D of the R&D relief rules, and that completion of R&D stages and substantive factual economic activity can suffice to show expenditure was “incurred on” R&D even where work is subcontracted.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The tribunal noted that inconsistencies in witnesses’ evidence do not automatically destroy overall credibility and that documentary evidence remains primary in commercial disputes. It also rejected attempts to re-characterise ordinary commercial contracts by importing “true agreement” principles derived from employment/statutory‑worker contexts where statutory interpretation is central.