Get Onbord Limited (in liquidation) v The Commissioners for HMRC

This appeal concerns a claim made by the Appellant (“GOL”) for an “R&D tax credit” under section 1054 of the Corporation Tax Act 2009 (“CTA 2009”). HMRC rejected GOL’s claim on the basis that its project did not advance overall knowledge or capability and therefore did not amount to research and development (“R&D”), which is a prerequisite for making a claim under section 1054 CTA 2009, and the question for us is whether this conclusion was right.

The project we are concerned with was described (by GOL’s advisers, Myriad Associates (“Myriad”)) like this:

Before dealing with the substantive questions in this appeal, we should set out an interesting procedural point which emerged and how we dealt with it. On 3 January 2024 the Tribunal heard this Appeal by video conference (“the Hearing”) and subsequently made directions for the further conduct of these proceedings, principally allowing further written submissions to address issues which arose but were not resolved during the Hearing.

On 10 January 2024 HMRC drew the Tribunal’s attention to the fact that GOL had been in liquidation since October 2023 and asked the Tribunal to make Directions consequential on that.

On 2 February 2024 GOL (acting through its Joint Liquidators) submitted that, whilst Mr Cahill (a former Director of GOL who represented the company at the Hearing) was not authorised to represent GOL after the company went into Liquidation, the Joint Liquidators wished to adopt the arguments put forward by him and allow the appeal to be continued by him on the Joint Liquidators’ behalf.

On 9 February 2024 HMRC submitted that the appeal should be reheard as the Liquidators had confirmed that they first became aware of the appeal on 8 January 2024, five days after the Hearing. As such, Mr Cahill was acting at the Hearing with neither the knowledge nor the authority of the Joint Liquidators.

HMRC said that they recognised the pragmatic appeal of allowing such a retrospective authorisation, as it would allow the proceedings to conclude promptly with minimal additional costs, but they submitted that they were unable to identify any basis in law for that approach. They said that it would be an error of law for the Tribunal to rely on evidence given and submissions made by persons who had no standing. There would be nothing to prevent either party from seeking permission to appeal to the Upper Tribunal on that basis alone. HMRC submitted that this approach risked inadvertently prolonging the resolution of the matter and increasing the costs for all parties.

HMRC also submitted that allowing the Hearing to stand in the present case would be to legitimise and empower others, who in the future find themselves in the equivalent position to Mr Cahill, to pursue litigation where they do not have standing. Such individuals could claim that they intended to regularise their position retrospectively. HMRC submitted that it is a fundamental tenet of English law that litigation should only be conducted between parties who have standing before the relevant court, and it would be inappropriate for the Tribunal to give credence to an approach that undermined that approach.

On 16 February 2025 GOL replied saying that there was no intention of “banking” a hearing. The confusion stemmed from the company’s situation and was not a strategic ploy. The Joint Liquidators would present the same arguments at any new hearing, bringing all parties back to the same place they are in now. Initiating additional hearings would just risk prolonging the resolution of the appeal and imposing undue burdens on all involved.

We considered HMRC’s submission that it is not open to the Tribunal to allow the Joint Liquidators to adopt Mr Cahill’s submissions. Clearly, on the appointment of a liquidator all the powers of a director cease, and so we agree that Mr Cahill had no capacity to represent GOL at the Hearing.

We too were unable to find any authority which discusses whether a liquidator can retrospectively sanction a director’s otherwise unauthorised acts. However, Schedule 4 (“Schedule 4”) of the Insolvency Act 1986 sets out the powers of a liquidator in a winding up. Paragraph 4 of Schedule 4 gives a liquidator power to bring or defend any action or other legal proceeding in the name and on behalf of the company. Paragraph 13 gives the liquidator a wide power to “do all such other things as may be necessary for winding up the company’s affairs and distributing its assets”. Whilst we were unable to locate any authority to the effect that the Joint Liquidators can retrospectively validate any invalid act of a former director, such as Mr Cahill’s acts here, the provisions we have just cited from Schedule 4 seem to us to give the Joint Liquidators power to continue the appeal and to decide how to do that, which would include endorsing the arguments run by Mr Cahill at the Hearing and allowing him to continue to run the appeal going forward.

Rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax) Chamber Rules 2009 (“the Rules”) provides that the Tribunal is to seek to give effect to the overriding objective in exercising its power under the Rules. The overriding objective is to deal with cases fairly and justly. In turn this includes avoiding delay (so far as compatible with the proper consideration of the issues) and dealing with cases in a way which is proportionate to the complexity of the issues and the anticipated costs and resources of the parties.

Rule 5 of the Rules gives the Tribunal a wide power to regulate its own procedure.

We could not see any unfairness or injustice in allowing the Hearing to stand. There is no suggestion here that the Joint Liquidators had authorised Mr Cahill to represent the Appellant at the Hearing or that Mr Cahill was deliberately setting out to get into a position where he could (if he chose) have a “second bite of the cherry”.

As to the argument that allowing the Hearing to stand would encourage people to behave as Mr Cahill has done, but deliberately and cynically rather than inadvertently, we considered that the likelihood of a situation like this arising at all must be very small; it requires a liquidator not to know of an appeal which is being conducted by a director (rather than a professional adviser, who would surely know of the appointment of the liquidator and its consequences), who does not realise the implications of a liquidator being appointed and who goes ahead and represents the company personally before the liquidators get to know about it. We would be very surprised if this had happened in any other case; if it has, it must surely be very rare.

To conclude, we decided that the Joint Liquidators had power to endorse the submissions made by Mr Cahill and to ask that the Hearing stand, that it would be fair and just and best give effect to the overriding objective to agree to that course of action and doing so would not run the risk of creating a precedent which could be cynically exploited in the future. For these reasons, we dismissed HMRC’s application and directed that the appeal should not be reheard.

We turn now to the substance of the appeal.

GOL is a Small or Medium-Sized Enterprise (“SME”) for the purposes of the R&D legislation. As a result, if GOL made a “Chapter 2 surrenderable loss”, it was entitled to claim an R&D tax credit, an amount of money payable to it by HMRC. This is the claim that GOL made and that HMRC rejected. HMRC rejected the claim because it considered that GOL’s did not incur expenditure on “research and development”. To understand where that requirement comes from and what it means entails a rather circuitous journey around legislation and guidance, on which we now embark.

The starting point is that, for GOL to make a “Chapter 2 surrenderable loss”, it needed to have been entitled to an additional deduction under section 1044 CTA 2009; see section 1055(2)(a) CTA 2009.

To be entitled to an additional deduction under section 1044, GOL needed to have incurred “qualifying Chapter 2 expenditure”.

Section 1051 CTA 2009 defined “qualifying Chapter 2 expenditure” as “qualifying expenditure on in-house direct research and development”.

Section 1052 set out the conditions for expenditure to qualify as “qualifying expenditure on in-house direct research and development” and this included a requirement (Condition B in section 1052(3)) that the expenditure was “attributable to relevant research and development undertaken by the company”.

Section 1041 provided that “research and development” has the meaning given by section 1138 of the Corporation Tax Act 2010 (“CTA 2010”). Section 1138 provided as follows:

Section 1006 of the Income Tax Act 2007 (“ITA 2007”) provided as follows:

The Treasury has made regulations, the Research and Development (Prescribed Activities) Regulations 2004 (SI 2004/712) (“the Regulations”), under section 1006. So far as relevant, the Regulations provide in regulation 2:

The 5 March 2004 guidelines (the “BEIS Guidelines”) had been updated on 6 December 2010 and that is the version which was in force at the time we are concerned with. It contained the following passages relevant for us:

So far as the correct approach to the interpretation of the BEIS Guidelines is concerned, we are required to approach this on a strict basis, not seeking to adopt a purposive construction. The proper approach to take was discussed in Gripple v HMRC, [2010] EWHC 1609 (Ch), at [12], where Henderson J (as he then was) had described the earlier version of the Guidelines as follows:

The same is true of the current version of the Guidelines; see the FTT decision in Hadee v HMRC [2020] UKFTT 0497 (TC), where the FTT held that “a narrow approach was required” and that “the Guidelines require a strict interpretation to achieve their purpose”. This approach was also endorsed by the FTT in Flame Tree Publishing (discussed below).

We heard from two witnesses, Mr Cahill (for GOL) and Mr Umar (for HMRC). We summarise their evidence below.

We also had a hearing bundle, which contained a number of reports, prepared by Myriad, explaining various aspects of GOL’s project. As is to be expected, the documents prepared by Myriad contain argument and assertion (most obviously, repeated statements that one or more of the requirements of the BEIS Guidelines were met). We have not attached any weight to the passages in the documents which contain argument, submission or assertion; it is for the parties to make their submissions on these issues and for us to form a view on them. However, HMRC made no challenge to the admissibility, truth or relevance of the contents of any of these documents and we have considered the passages in the documents which contain factual narrative as evidence of the facts they describe. We set out below the information we have collected from these documents.

In a report dated 4 August 2021, Myriad summarised GOL’s project (their summary is set out at [2] above) and went on to outline a number of difficulties GOL needed to grapple with. Some of these were of a non-technological nature. In terms of features which might indicate that what GOL was doing amounted to R&D, they mentioned the following:

On 15 September HMRC wrote to Myriad explaining that they did not feel that GOL’s work amounted to R&D., and on 29 September Myriad replied and sought to address HMRC’s concerns. In particular, Myriad set out what they said was detailed evidence of technological advancement, including the following:

Another example was iteratively developing shareholder identification and address validation algorithms.

On 12 November 2021 HMRC replied, describing GOL’s project in glowing terms (“a complex platform … the project took a lot of hard work and dedication … impressive”), but indicating that (despite all the information Myriad provided) they were “still unclear as to what advance has been achieved as per para 6 of the BIS guidelines”. So far as the APIs and algorithms are concerned, HMRC said “:

HMRC’s overall conclusion was that:

Myriad responded on 23 November 2021, observing:

On 2 December 2021 Myriad sent a final response to HMRC. Myriad had told HMRC that this would include commentary from Lauren Olson, who had been a Senior Consultant/Program Manager at Experian for over 6 years and (in Myriad’s view) had domain expertise in this area. We set out some relevant commentary from Myriad’s final report below but note that we have been unable to find passages in that report which are attributed to Lauren Olson. Overall, they commented:

Myriad identified examples of weaknesses in existing technology and commented that “These are all technical problems which can be overcome given robust algorithms. However, the biggest issue with current technologies is beyond this: existing systems do not approach the KYC problem holistically. The compliance problem for politically exposed person (PEP) and AML screening is treated as a distinct process from credit checking and anti-fraud measures. This creates gaps in the decisioning and requires human controls and analysis to try and unite these different workstreams.”

They gave two other examples of technological advancement. The first was creating a robotic process to automate the onboarding journey. Here they commented:

The second example was replicating, using artificial intelligence, the manual processes used for internal credit, fraud, and compliance checks. Here they commented:

Myriad concluded by observing that the importance of GOL’s project was demonstrated by a Financial Times report which indicated that, although businesses and individuals will go through onboarding processes several times a year, fraud losses and regulatory fines are increasing alongside credit losses, giving as an example the £5bn losses said to have been incurred by “UK taxpayers” as a result of fraudsters exploiting the Covid-19 bounceback loan schemes. Creating a universal, automated system that works across industry verticals – such as the GOL platform – was (they said) key to reducing losses by performing identity verification, customer due diligence, and enhanced due diligence processes in a scaled, sustainable manner.

HMRC replied on 7 January 2022. They said that “We have taken the time and have carefully gone through your response which we received from yourselves along with using our CDIO officers, who are HMRC’s Chief Digital Information Officers.” Their conclusion was that no R&D had taken place. No reasons were given for that view.

On 14 October 2022 HMRC issued their review conclusion letter, upholding the decision that GOL’s project did not constitute R&D. The essence of the review conclusion was that there was no evidence of scientific or technological advance. For example, the reviewing officer commented that, “The use of the APIs, AI, algorithms, the data manipulation and database design may have been novel and difficult to achieve, however we have had no evidence that there has been an advance to any technologies in the process.”

As well as helping to present GOL’s case, Mr Cahill gave evidence about the project the company was working on. Some of his evidence (in particular, most of his original witness statement) was directed at what he regarded as the unfair treatment of GOL by HMRC. He was also critical of Mr Umar (HMRC’s witness), whom he described as having no technology experience.

We found Mr Cahill to be an impressive witness. He is clearly very experienced in his field and gave clear answers to Mr Lewis’ questions.

Mr. Cahill has worked for more than 25 years building models for investment banks. He has written code himself and described himself as an expert in building models to analyse risk.

Mr Cahill said that GOL is an innovative technology start-up with a workforce focused on coding and a substantial codebase in GitHub (Footnote: ³). In his witness statement he said that company has a competent professional, who can support and defend the claim. The company’s existence is based on creating innovative technology that advances the current state of the field. They do not have any other business line - R&D is their essence as an innovative start-up and is core to their business.

He said that on many occasions financial institutions need to measure the level of risk in a transaction. That requires them to validate the identity of their counterpart and investigate them. Put simply, the thinking behind the GOL project is to take lots of pieces of data on a person and use them to decide whether that person is a “bad guy” or not.  

There are products like those from Lexis Nexis and Dow Jones but they are little more than name checks and throw out lots of false positives. The Experian system is just an ID verification system, radically different from GOL’s.

Since the project started there have been major advances in software, most obviously open artificial intelligence. GOL has sought to take advantage of these. One example of a recent development is the Chat GPT and other translation functions. It is now possible to take pieces of information in a foreign language and feed them into a translation tool. GOL did not build a translation tool but accesses existing tools. What GOL has done is to write new code to feed information into a translation tool and then take outputs (translated information) from it.

At the same time, whilst some developments (e.g. large language learning models (sub-sets of AI)) have developed, making some problems easier to solve, fraudsters and other “bad actors” have evolved and they can leverage technology, giving another dimension to the problem which needs to be solved.

The team have written millions of lines of code to sit on top of various pieces of information.

Answering the question whether the company’s product enables people to do something they couldn’t do before, Mr Cahill said the answer to that is yes. The GOL system is all about creating an output. There are now more ways of gathering information, but their system is all about analysing it and using it to answer a question.  

One way of describing what GOL does is firing processing power at a problem. It would take hours and lots of people to run the checks and make the decisions GOL’s system ran.

They have also been working on creating intelligent online forms. You can ask an individual to fill in the form online and the GOL system will run its checks as the form is being filled in. Essentially, it validates what someone is writing as they fill the form in.

He described his project as creating knowledge and capability, using open-source material. The element of innovation is putting all the existing tools and information together and writing the code that links the component parts.

Mr Lewis asked Mr Cahill whether the model he was working on exists already in banks. Mr Cahill said that he had worked at a number of major banks but none of them have this system. Their typical solution is to employ lots of people to run these checks and make judgments on them. Mr Cahill said that he couldn’t say that no bank had developed the systems he had, but he wasn’t aware of any.  Mr Cahill had spoken to the head of financial crime at a major bank, who employs a large team of people to carry out exactly the sorts of checks the company’s programs are designed to carry out. The GOL system does all of this by pure technology.

Mr Lewis asked Mr Cahill whether he would use pieces of existing code and Mr. Cahill said that of course he would. Every piece of code is built on existing code; nobody writes code from scratch. Why would you when someone else has already done the work? GOL works by taking components and adding to them. It is rare for a software development to be completely novel.

GOL has not sought to protect its software. Mr Cahill said this is not common in the software industry except for some very large players. He said that people move jobs and take code with them. The company stores its code on GitHub, but it has not made it opensource. Mr Cahill explained that GitHub has several purposes. It is a place where tech firms can store code. Other developers can access opensource material stored there or license other material.

In answer to Mr Lewis’ suggestion that all we have here is an internal advance for GOL, Mr Cahill said that all he could do was look around to see what did not exist before embarking on a project. He was sure that this was more than an internal advance for his company. He would not waste years of his life working on something that someone else had already done.

In answer to the question whether the project was an overall advance, Mr Cahill drew a distinction between existing data (e.g. the database of addresses held by Royal Mail) and software/AI “building blocks” (e.g. the Chat GPT translation tool) on the one hand and “doing something on top” (e.g. code to connect the Chat GPT translation tool with data sources), which is the new work done by GOL. Mr Lewis suggested that GOL could do the same thing (using existing blocks and writing code around them). Mr Cahill said that he was not saying that no one else could do what GOL is doing if they knew what to do, but no one had done that.

Mr Lewis put it to Mr Cahill that the HMRC CDO/CDI team said that all that he is doing is data analysis or processing. Mr Cahill said that you could say that about all sorts of artificial intelligence. At the core of what they are doing is a lot of data, but they are using it to try to provide an intelligent answer to a question.

Mr. Lewis asked Mr Cahill whether he was a software developer. Mr. Cahill said that he would describe himself as a model and risk expert, but he needs to be able to write code to be able to do his job. His job has never been software development. Julian Guppy is responsible for software development at GOL. Mr Lewis suggested to Mr Cahill that, for the software project, the competent professional would usually be a software developer. Mr Cahill’s answer to that is that most people with his competence do not write software, but unusually he does and he is, as he put it, “technocratic”. 

We then heard from Mr Umar, who is the HMRC officer responsible for this case. Mr Umar was in a difficult position, as he has no technology experience or expertise, nor (beyond the fact that they are members of HMRC’s in-house software development team) was he aware of the credentials of those he sought advice from and who commented on his correspondence with GOL and its advisers. He does not know whether they had industry knowledge of KYC/ALM processes. This was the first software claim Mr Umar had dealt with.

We found Mr Umar to be an honest, straightforward witness, who was clearly trying to help as best he could, but his lack of scientific knowledge or experience meant that his evidence was of no real help to us in deciding the issues before us.

At the end of Mr Umar’s evidence we were unsure about HMRC’s position in relation to GOL’s project. Mr Lewis asked for permission to make some written submissions. To frame this, we summarised GOL’s submissions, as we understood them, and invited HMRC to respond. We summarised GOL’s submissions like this:

The responses we asked from HMRC were as follows:

It was shortly after this point that HMRC discovered that GOL was in liquidation and asked for the appeal to be re-heard in consequence. We have already explained how we dealt with that application. HMRC also sought permission to make submissions on section 1057 CTA 2009, which provides that a company can only make a claim (to an R&D tax credit) under section 1054 CTA 2009 if it is a going concern, but later withdrew that request as they discovered that the tax credit claim had been applied against the company’s unpaid PAYE liabilities in June 2021 and so section 1057(3) applied. Once these matters had been dealt with, HMRC responded to the points we had raised.

Beyond a point on when Chat GPT became available, which Mr Lewis suggested indicated inconsistencies in Mr Cahill’s evidence, but which Mr Cahill satisfactorily addressed, Mr Lewis did not take issue with the factual summary recorded at [66] above.

Mr Lewis did, however, make some very detailed submissions in responses to our third request. In summary, these are his submissions:

In a very detailed reply, Mr Cahill submitted:

Before we embark on our discussion of the evidence and arguments presented to us, there is an important preliminary point we should make. As well as criticising HMRC for a lack of scientific knowledge and rigour, Mr Cahill and Mr Dowsett criticised HMRC’s general approach to GOL’s claim, which they say is out of line with the way HMRC have dealt with previous claims. Mr Cahill’s original witness statement was largely given over to this topic and it was said that Myriad had never seen a claim like this rejected before. This theme is reflected in the Financial Times article Mr Cahill sent to us with his final submissions (see [71](12) above).

Whilst we read that article, we should stress that we have put the issues it raises to one side. Questions of whether the UK should have a regime for encouraging R&D spend and what that regime should be are for the government and Parliament to decide. Questions as to whether HMRC have applied the law fairly and consistently are, if anyone seeks to raise them, for the Administrative Court. We are concerned only with the more prosaic question, whether HMRC have applied the existing law correctly in this case.

We agree with Mr Lewis that it is for GOL, as the company making the R&D claim, to substantiate its entitlement, not for HMRC to justify its decision to deny the credits claimed. However, although the burden of proof is on GOL, we need to keep in mind what is often referred to as the shifting of the evidential burden. In Brady v Group Lotus plc [1987] STC 635, Mustill LJ (in the majority in relation to the legal burden of proof) stated at 643f-h:

We can see this principle at work in a tax case in the decision of the Court of Appeal in Wood v Holden, [2006] EWCA Civ 26. In that case the taxpayers had entered into a scheme to mitigate the charge to capital gains tax on the disposal by the taxpayers of their company. The case turned on the residence of a company, Eulalia, incorporated in the Netherlands. HMRC had charged capital gains tax, finding that Eulalia was resident in the UK for tax purposes. The Special Commissioners had dismissed the taxpayers’ appeal, holding that the taxpayers had not established that Eulalia was not resident in the UK for tax purposes. The taxpayers appealed to the High Court, which reversed that finding, upholding the taxpayers’ appeal. HMRC appealed to the Court of Appeal, which found for the taxpayers.

The Special Commissioners in Wood v Holden, appear to have decided the case (at least in part) on the basis that the taxpayers had not satisfied them that Eulalia was not UK tax resident. Park J thought that they were wrong to have done so in the light of the state of the evidence before them. The Court of Appeal agreed, holding:

The relevance of the shifting of the evidential burden here is that there may come a point where GOL can say something along the lines of, “We have done enough to raise a case that our project comprised an overall advance in science and technology. What more can the Tribunal expect from us? The burden must now pass to the Revenue to produce some material to show that, despite what appears from everything we have produced, our project was a routine advance.”

The importance of evidence (as opposed to assertion and argument) in the context of R&D claims can be seen in the decision of the First-tier Tribunal (“FTT”) in AHK Recruitment Limited v HMRC, [2020] UKFTT 232 (TC), where the FTT commented:

The FTT came back to the need for evidence in a decision released just after we had received written submissions, Flame Tree Publishing Limited v HMRC, [2024] UKFTT 00349 (TC). As well as stressing again the need for evidence, the FTT discussed whether, in order to support an R&D claim, a taxpayer needs to produce evidence from a “competent professional” and whether two individuals in that case were competent professionals. The FTT recorded the submissions of Mr Lewis (for HMRC) as follows:

At [68] the FTT said that it had “no hesitation in agreeing with HMRC, for the reasons given by Mr Lewis” and (so far as the question whether the individuals were competent professionals) some additional reasons of its own, and concluded (at [69]) that:

In a report prepared by Myriad for HMRC, Mr Cahill is described as an “Investment banking expert in modelling. Expert in granular credit risk and algorithms.” He has a degree from University College Dublin in International Commerce & French. In contrast, Mr Guppy is described as having “20+ years’ of relevant experience in Software development, creating new software products at various financial institutions and fintechs”. His academic qualifications are an ordinary national certificate (ONC) in Computer Science awarded by BTEC. An ONC is a Level 3 qualification, equivalent to A Levels. Mr Cahill described himself to us as the directing mind of the R&D research activities at the company, an expert in his field and fully aware of the state of the art in the space. He accepted in cross-examination that he was not a software developer and that most people with his competences do not write code, but he said that he needs to be able to write code to be able to do his job. As he put it, it is often much faster if he gets on and writes code himself rather than asking other people to do that. He described himself as “technocratic”.

Although Mr Cahill does not have any formal qualifications in this area (nor, we note in passing, does Sam Altman, who dropped out of his computer science course at Stanford), Mr Cahill was a very impressive witness, who spoke with complete fluency about the technical way in which GOL’s project worked and answered Mr Lewis’ questions with assurance. Although his original witness statement suggested that someone else (we assume, Mr Guppy) was the competent professional, we are completely satisfied that Mr Cahill has experience (including in coding) and up-to-date knowledge of software capabilities, albeit perhaps only in the area he works in, to be a “competent professional” for our purposes. He is far more than “a publisher with some familiarity with computing, [or someone who] was familiar with using computers but not a professional in the fields of programming or software development” (to quote the FTT’s description of the two individuals who were held not to be competent professionals in Flame Tree Publishing).

Mr Lewis did not submit to us, as he (or someone else with the same name) had done in Flame Tree Publishing, that, to support an R&D claim, a taxpayer needs to produce evidence from a “competent professional”.

Because we have concluded that Mr Cahill is a competent professional, we do not need to express a view as to whether we agree with that submission (as the FTT did in Flame Tree Publishing ) or whether it is open to us, in the absence of evidence from an accepted competent professional, to reach a conclusion on all the evidence submitted to us on questions such as what could be deduced by a competent professional from information in the public domain or what view a competent professional would have taken of a particular advance. We are not sure that we would have agreed with Mr Lewis with the same degree of alacrity as the FTT did in Flame Tree Publishing, so it comes as a relief not to have to express a conclusion on this issue.

At its simplest, Get OnBord needs to show that it has a project which seeks to make an advance in overall (not just its own) scientific knowledge or capability by resolving a scientific or technical uncertainty (which is a reference to a situation where knowledge as to whether something is scientifically possible or technologically feasible is not readily available or deducible by a competent professional and which can include system uncertainty).

To advance overall knowledge means going beyond what is publicly available or readily deducible by a competent professional; routine copying or adaptation is not enough.

An “R&D” project can be “applied” (in the sense that it can lead to a tangible, commercial result, such as a new or appreciably improved process or product) as long as it incorporates an overall scientific advance.

We do not agree with Mr Lewis that GOL did not have a “project”. The BEIS Guidelines (at paragraph 30) describe a project as a number of activities conducted to a method or plan to achieve an advance in science or technology. It is clear from Myriad’s description of the project that it was an overall process with a defined objective of developing an AI process for KYC verification and risk-profiling. That objective defined the boundaries of what GOL was doing. Clearly, the project would evolve over time, but this does not mean that there is no method or plan designed to achieve GOL’s goal.

The next question is whether this project was seeking to resolve a scientific or technological uncertainty. The evidence is that GOL was trying to work out whether it was technologically feasible to build an AI system to deal with KYC verification and risk profiling. The uncertainty is nothing to do with KYC or risk profiling requirements themselves. Mr Cahill readily agreed that GOL was not looking at KYC/AML or risk profiling requirements themselves; it was looking to see if it could develop an AI system that could do this better than humans can. Mr Cahill’s evidence, reflected in the Myriad reports, was that there was no system in the market that did this and in consequence it was uncertain whether it would be possible to build a system that could do all that was required.

As well as this overall, macro-level uncertainty, there was uncertainty over particular aspects of the project. The August 2021 Myriad report identifies uncertainties in areas such as developing algorithms to perform data normalisation, and developing a method to integrate and normalise data to reduce the time taken in the process.

We can see detailed examples of particular pieces of development work undertaken in the September 2021 Myriad report and the December 2021 report. These examples show new features being created and experimented with and improved. None of these pieces of work appear to be routine or readily deducible developments.

Mr Cahill’s evidence is that a massive amount of new code was written as part of the project, which goes far beyond “routine” adaptation of existing technologies. This code sits on top of the information, gathered using existing sources and software/AI tools, and establishes a capability that was not there before.

Whilst the test in the BEIS Guidelines is not whether a new function has been developed, we accept Mr Cahill’s submission that creating a new function, solving a real-world problem in a new and creative way using technology, is at least an indication that there has been an appreciable technological advance. In addition, we have Mr Cahill’s evidence that he could not see technology being used this way anywhere, no bank had developed a system like this that he knew of (the market solution being to throw bodies at the task) and (as he put it) he would not waste years of his life trying to do something someone already could.

We also accept that using existing code (including from a code library) or other technologies already in existence (for example, using existing programming languages, frameworks and tools) is common in the software development world. We can see that for ourselves in the way the non-profit OpenAI organisation works, and we had evidence from Mr Cahill about one of the uses of GitHub. We do not consider that, of itself, the use of open source, or other existing, materials is an indication that a particular development is routine or readily discernible from publicly available materials. The question whether a development is an overall advance is a question to be answered in individual cases (by asking whether the development is a routine advance or otherwise readily discernible), but it is not necessary for that to be the case that each component part of the solution must itself be novel or bespoke to the project in question. As Mr Cahill observed, given the amount of open-source software/AI material available, if complete novelty were the test, no software project would ever amount to R&D. That is quite clearly not the case as the BEIS Guidelines themselves contemplate that an appreciable improvement to an existing process can amount to R&D.

In the light of all this, we are satisfied, on the balance of probabilities, that:

We discussed earlier the shifting of the evidential burden and the possibility, given the lack of evidence (as opposed to assertion and argument) put forward by HMRC, that we might come to a point where GOL could say something along the lines of, “We have done enough to raise a case that our project comprised an overall advance in science and technology. Over to HMRC to produce some material to show that, despite what appears from everything we have produced, our project was a routine advance.” We certainly consider that we have reached that point. However, that observation notwithstanding, we have reached our decision simply by asking ourselves whether, on the basis of the evidence we have read and heard, we think it more likely than not that the statements in [95] are correct. As we have already indicated, our answer to that question is “Yes”. To the extent that the shifting of the evidential burden might suggest a lower state of satisfaction (and we are not sure that it does), that forms no part of our analysis.

Our answer to the question we asked ourselves at the head of this section of our decision (Has GOL proved what it needs to prove?) is “Yes”.

For the reasons set out above, we have concluded that GOL’s project did constitute research and development within the meaning in the BEIS Guidelines. The argument that it did not was HMRC’s only objection to the claim made by GOL for an R&D tax credit under section 1054 CTA 2009. It follows that GOL was entitled to make the claim and that its appeal is allowed.

Before concluding we would like to add a few words about process. It will be readily apparent that this case has turned on the question of the scientific/technological quality of GOL’s project, putting the point very (possibly too) simply “Was it a routine development or a real, meaningful scientific/technological advance?” We consider that these proceedings would have been much more straightforward (and possibly could have been avoided) if, at an early stage, both parties had “put their scientific cards face up on the table”. Ideally, GOL would have produced a single document in which it marshalled all its scientific/technological evidence, including evidence from a competent professional (which is clearly highly desirable, whether or not it is strictly necessary), and HMRC would then have replied to that document with details of its own scientific analysis and evidence. It is not for us to tell other people how to run their cases, but our experience in this case would lead us to suggest this as an approach which might usefully be considered where similar issues arise.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.