Tribunal rejects £880,286 R&D claim for care home Covid-19 measures

The background

Tanglewood operates seven residential care homes and, like every care provider, faced acute pressure to protect vulnerable residents during the Covid-19 pandemic. In response, it developed and continually refined a package of measures including PPE protocols, testing regimes, visitor restrictions, cohorting of residents, enhanced cleaning and staff segregation.

The company’s case was that the advance lay not in any single measure but in how these were combined, monitored and adjusted into an integrated system, an approach it argued fell within the “system uncertainty” provisions of the DSIT Guidelines.

The claim’s route to tribunal ran as follows:

• 28 February 2022: Tanglewood filed its corporation tax return for the year ended 31 January 2021 with no R&D claim included.
• 9 September 2022: The company submitted an amended return claiming £880,286 in enhanced R&D expenditure for a single project managing the outbreak and effects of Covid-19.
• HMRC opened an enquiry, concluded the activities did not meet the R&D test, and removed the claim by closure notice.
• 6 August 2026: the tribunal upheld HMRC’s position and dismissed the appeal.

Why the claim failed

The tribunal accepted that Tanglewood ran a genuine, structured project and responded with real diligence to an extraordinary crisis. It also confirmed that system uncertainty claims are viable in principle, so a claim isn’t automatically defeated just because the individual components involved are already known measures.

Where the claim failed was on substance. The tribunal concluded that the activities did not demonstrate an advance in overall knowledge or capability in a field of science or technology. The uncertainties Tanglewood faced, such as staffing, visitor policy, admissions, and procurement, were operational and managerial in nature rather than scientific or technological.

The tribunal also noted the absence of evidence from a suitably qualified expert in the relevant scientific field. Crucially, none of the company’s witnesses, though experienced and credible care home operators, had expertise in virology, epidemiology or infection science.

What this means for claimants

Tanglewood is a useful marker of where HMRC and the tribunals draw the line between innovation and R&D. Solving a difficult operational problem, however novel the circumstances, is not the same as resolving a scientific or technological uncertainty.

System uncertainty claims are still possible, but only where a competent professional could not have deduced how the known components would interact. It is not enough for the combination to be new to the business; it must represent an advance in overall knowledge or capability for the field as a whole. Evidence from a competent professional in the relevant scientific or technological field is therefore essential from the outset. Without it, a claim will be difficult to defend, however well organised the underlying work may have been.