R&D tax relief

When Innovation Is Not R&D: What the Tanglewood Tribunal Means for Tax Relief Claims.

A business can solve a genuinely difficult problem, develop new ways of working and invest considerable time and money in doing so. That does not necessarily mean the work qualifies for Research and Development tax relief.

Quick answer.

Tanglewood Care Services Limited claimed £880,286 of enhanced R&D expenditure relating to work carried out during the Covid-19 pandemic. The tribunal accepted that the company had undertaken a genuine, organised project, but found that it had not demonstrated an advance in overall science or technology through the resolution of scientific or technological uncertainty. The absence of evidence from a suitably competent professional was also significant.

A recent First-tier Tribunal decision involving Tanglewood Care Services Limited provides a particularly useful example of where the line between business innovation and qualifying Research and Development can sit.

Tanglewood developed and continually refined a substantial package of measures to manage Covid-19 across its residential care homes.

It later claimed £880,286 of enhanced R&D expenditure relating to that work.

HMRC rejected the claim. On 6 August 2026, the First-tier Tribunal agreed and dismissed Tanglewood’s appeal.

You can read the full First-tier Tribunal decision .

Important: the £880,286 figure was expenditure claimed as enhanced R&D expenditure. It should not be described as £880,286 of tax relief.

What did Tanglewood actually do?

Tanglewood operated seven residential care homes during the relevant period.

The Covid-19 pandemic presented an obvious challenge. Its residents were predominantly elderly and many were particularly vulnerable.

The company introduced and continually reviewed measures including:

PPE requirements;
testing;
visitor restrictions;
resident isolation and cohorting;
staff segregation;
enhanced cleaning;
changes to admissions; and
systems for collecting and reviewing information from individual homes.

The project was described as:

“Managing outbreak & effects of a Global Pandemic in a residential care home (Covid-19).”

Tanglewood argued that the R&D did not lie in any single measure.

Instead, it said the advance came from developing, combining and refining an integrated system of measures to control Covid-19 within the particular environment of a residential care home.

That argument is important because genuine R&D does not necessarily require every component of a project to have been invented from scratch.

HMRC’s guidance recognises the concept of system uncertainty , where known technologies or processes may potentially qualify if a competent professional could not readily determine how they should be combined to achieve the required result.

The tribunal accepted that there was a genuine project.

This is one of the more interesting parts of the decision.

HMRC argued that Tanglewood was effectively reacting to events rather than conducting a sufficiently identifiable R&D project.

The tribunal disagreed.

It found that Tanglewood held regular management meetings, gathered and reviewed information, monitored Covid cases and continually modified its procedures.

A formal written project plan was not essential. The tribunal found that Tanglewood’s activities, taken together, amounted to a coordinated programme directed towards a defined objective.

That is useful clarification for businesses.

However, demonstrating that a project existed was only the first hurdle.

Where did the R&D tax relief claim fail?

The central issue was the nature of the advance being sought.

HMRC’s current guidance says a qualifying R&D project must seek an advance in a field of science or technology.

The advance must relate to overall knowledge or capability in that field, rather than simply improving what one particular company knows or can do.

See HMRC’s guidance on Corporation Tax Research and Development relief .

Tanglewood had unquestionably improved the way it managed an extraordinary situation.

The tribunal accepted that its response involved considerable judgement, ingenuity, effort and organisational skill.

But that was not the test for R&D tax relief.

Innovative for the business does not automatically mean an advance in science or technology.

The tribunal concluded that Tanglewood was primarily determining how best to deploy and manage infection-control measures within its own care homes.

The evidence did not establish that the project sought an advance in overall scientific or technological knowledge or capability beyond Tanglewood’s own operations.

New to your business does not automatically mean new to the field.

A process can be completely new to your company and still fail the R&D test.

HMRC’s guidance distinguishes between an advance in a company’s own knowledge and an advance in the overall knowledge or capability of the relevant scientific or technological field.

See HMRC’s guidance on advances in science or technology .

Instead of asking only:

“Have we never done this before?”

or:

“Was this difficult for us?”

a more useful question is:

“What scientific or technological capability were we trying to achieve that a competent professional in the field could not readily work out using existing knowledge?”

Operational uncertainty is not necessarily technological uncertainty.

There was certainly uncertainty during the pandemic.

Government guidance changed. Scientific understanding developed rapidly. Care-home operators had to make difficult decisions with incomplete information.

The tribunal expressly acknowledged that.

What it did not accept was that most of the uncertainties Tanglewood was addressing were scientific or technological uncertainties for R&D tax purposes.

Many related to staffing, visitors, admissions, resident welfare, PPE procurement and the practical management of care homes.

Those were genuine and difficult business problems.

The tribunal regarded them as predominantly operational and managerial rather than scientific or technological.

A project can be challenging, commercially important, innovative, expensive and successful while still not qualifying for R&D tax relief.

HMRC’s current guidance similarly requires a project to seek a scientific or technological advance through resolving a specific scientific or technological uncertainty .

The competent professional became a major issue.

Perhaps the strongest practical lesson from the case concerns evidence.

Tanglewood’s witnesses had substantial experience in running care homes.

The tribunal described them as honest, conscientious and experienced.

But none could provide authoritative evidence about the relevant scientific or technological field, such as epidemiology, virology, infectious-disease transmission or infection science.

That left an important evidential gap.

Four questions the evidence needed to answer

Question	Why it matters
What was already known?	You need a credible technical baseline before you can establish that a genuine advance was being sought.
What could a competent professional readily deduce?	If the solution was already readily deducible to a suitably qualified professional, the uncertainty may not qualify.
What was the scientific or technological uncertainty?	General business difficulty, cost or complexity is not enough.
What advance was the company trying to achieve?	The advance needs to extend beyond simply improving the company’s own processes or capabilities.

HMRC says a company’s competent professional should be able to explain the advance sought and why it represents an advance in the overall field, supported by an objective review of existing knowledge and the work undertaken.

See HMRC’s guidance on the competent professional .

What the Tanglewood decision does not mean.

It would be too simplistic to interpret the case as saying that using existing technology or existing processes can never qualify.

The tribunal specifically rejected that approach.

It accepted that a project can potentially qualify through system uncertainty, including where existing components or processes interact in a way that creates genuine scientific or technological uncertainty.

It also accepted that a project does not necessarily have to create completely new underlying scientific knowledge.

An advance in overall capability can potentially qualify too.

The key question is therefore not simply:

“Were all the components already known?”

It is whether a competent professional could readily determine how those components should be combined or developed to achieve the intended scientific or technological result.

That distinction can be particularly important in fields such as software, engineering, manufacturing and complex technical systems.

RiverView view: test the R&D before calculating the claim.

This decision reinforces something businesses should consider before getting anywhere near a spreadsheet of qualifying expenditure.

Start with the project, not the tax saving.

Before calculating salaries, subcontractor costs, software expenditure or other potentially qualifying amounts, a company should be able to explain the technical basis of its claim.

Identify the relevant field of science or technology. Be clear about the technical discipline in which the claimed advance sits.
Establish the existing baseline. What was already known or readily available to competent professionals in that field?
Define the advance being sought. Explain what improvement in overall scientific or technological knowledge or capability the project was intended to achieve.
Identify the scientific or technological uncertainty. Explain why the answer could not readily be deduced by a competent professional.
Show how the project tried to resolve it. Connect the technical work directly to the uncertainty being addressed.
Identify the competent professional. Make sure the person supporting the technical analysis genuinely has relevant expertise in the field.
Keep the evidence. Technical records, tests, failures, design changes and contemporaneous notes can all help demonstrate what actually happened.

Only once those questions stand up should the company move on to determining which costs may qualify.

That is very different from starting with:

“We spent a lot of money developing this, so how much can we claim?”

We have previously looked at the risks around claim preparation in our guide to proactive R&D tax credit support .

Documentation still matters, even without a formal project plan.

Tanglewood succeeded on one point that may reassure some businesses: the tribunal did not insist on a formal written project plan.

But that should not be interpreted as an argument against keeping good evidence.

A company may need to demonstrate months or years later what its technical team knew, what uncertainty existed, what alternatives were considered and why particular work was undertaken.

Contemporaneous records can be much more persuasive than trying to reconstruct that story retrospectively.

Depending on the project, useful evidence might include:

technical specifications;
design notes;
test results;
failed approaches;
development logs;
meeting records;
prototype or trial results; and
commentary from the relevant competent professionals.

The exact evidence required will vary from project to project.

R&D claims have changed since Tanglewood’s claim.

The Tanglewood claim related to an accounting period ending in January 2021 and therefore concerned the former SME R&D regime.

The current system has changed substantially.

For accounting periods beginning on or after 1 April 2024, the old SME and RDEC arrangements were replaced by the merged R&D expenditure credit scheme and Enhanced R&D Intensive Support for qualifying loss-making R&D-intensive SMEs.

Companies making current claims also generally need to submit an Additional Information Form to HMRC before, or on the same day as, the Corporation Tax return containing the R&D claim.

The mechanics have changed, but the core technical questions remain: what was the scientific or technological advance, what uncertainty prevented it, and who is suitably qualified to establish that?

A difficult problem is not automatically R&D.

The most useful lesson from Tanglewood is probably also the simplest.

The tribunal did not criticise the company’s response to Covid-19.

Quite the opposite.

It accepted that Tanglewood responded in a diligent, innovative and proactive way to an unprecedented situation.

But R&D tax relief is governed by a specific definition.

Innovation in the ordinary business sense and R&D for tax purposes are not the same thing.

That does not mean businesses should be reluctant to claim where genuine qualifying R&D exists.

It means the claim needs to begin with a technically credible assessment of the project and evidence that matches HMRC’s actual tests.

If you are considering an R&D claim, reviewing an existing claim or responding to questions from HMRC, our tax team can help you assess the position before unnecessary risk is created.

Is your R&D claim built on the right foundations?

A strong R&D claim starts with the technical project, the uncertainty and the evidence, not simply a calculation of expenditure.

RiverView Portfolio can help you review the tax position, identify potential weaknesses and make sure the financial side of the claim reflects the underlying technical analysis.

Speak to the RiverView team

Frequently asked questions.

What counts as R&D for tax purposes?

A qualifying project must seek an advance in a field of science or technology and undertake activities aimed at resolving scientific or technological uncertainty. An improvement that is merely new to the individual company is not enough.

Does an R&D project have to invent something completely new?

No. Existing technologies, methods or components are not automatically excluded. A project may potentially qualify where combining or developing them involves genuine scientific or technological uncertainty that a competent professional could not readily resolve.

Does an R&D project need a formal written project plan?

Not necessarily. The Tanglewood tribunal accepted that a project existed despite the absence of a formal written project plan. However, good contemporaneous documentation can still be extremely important when supporting a claim.

What is a competent professional for R&D tax purposes?

HMRC expects a competent professional to have appropriate expertise and up-to-date knowledge in the relevant scientific or technological field. Their evidence should help establish the existing state of knowledge, the advance being sought and why the uncertainty could not readily be resolved.

Can care homes claim R&D tax relief?

The Tanglewood decision does not create a blanket rule preventing care businesses from claiming R&D relief. Any project still needs to satisfy the normal tests around science or technology, advancement and qualifying uncertainty.

Can operational problems qualify as R&D?

An operational problem on its own is not enough. The project needs to involve an advance in science or technology and activities directed at resolving scientific or technological uncertainty. Tanglewood’s principal uncertainties were found to be operational and managerial rather than qualifying scientific or technological uncertainties.

What evidence should a business keep for an R&D claim?

Evidence will depend on the project, but businesses should be able to establish the technical baseline, the advance sought, the uncertainty, the work undertaken to resolve it and the role of the competent professional. Technical specifications, tests, development records and contemporaneous project notes may all be relevant.

Does the Tanglewood case still matter under the current R&D regime?

Yes. The claim itself related to the former SME scheme, but the underlying concepts of an advance in science or technology, scientific or technological uncertainty and evidence from a competent professional remain important under the current R&D rules.

Official guidance and sources.

This article provides general information only and does not constitute tax advice. Whether a project qualifies for R&D tax relief depends on the specific technical facts, the applicable legislation and the evidence available.