Environmental Services Limited v The Commissioners for HMRC

Facts

Environmental Services Limited, formerly Environmental Services (Chesterfield) Ltd, is a small Derbyshire waste business incorporated on 3 September 2002 and jointly owned by Miss Kellee Boller and Mr Robert Moore, both directors. It collects and transports waste to disposal sites but does not process waste itself, and maintains a full manufacturing workshop on its premises. Following a regulatory change around 2016/2017 restricting which sites particular waste could be taken to, and after winning a contract in July 2019 to remove waste from the upgrade of the M1 motorway to a smart motorway — work carried out at night under severe time pressure while disposal sites were shut — the company undertook work on two interlinked projects: one concerning loading, agitation and separation methods for effluent, toxic and recyclable materials, involving storage tanks using propeller and water agitation and polymer or gravity separation; the other concerning agitation methods for tankers, adapting its self-designed vehicle known as the Hulk. It claimed research and development enhanced expenditure for the accounting periods ended 31 July 2020 and 31 July 2021, comprising proportions of the salary costs of Mr Aiden Race, its additional yard foreman, and of the two directors, together with invoiced costs. HMRC issued closure notices under schedule 18 to the Finance Act 1998 disallowing the claims, and the company appealed to the First-tier Tribunal.