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Vaccine Research Limited Partnership and other v HMRC

The case name here may be familiar because there has a been a previous decision relating to this structure. It was set up in a way which was, broadly, designed to produce a tax loss, related to research and development expenditure greater than the amount actually invested by the partners in the partnership. The FTT and UT found that the vast majority of the expenditure was not actually incurred on R&D but was simply part of a circular funding mechanism and therefore reduced the loss to a fraction of what had originally been claimed.

This further appeal concerns one element of the structure. On a strict legal analysis the partners were entitled to receive licence fees for the use of the R&D In reality, sums representing these fees were used to pay off indebtedness and the individual partners did not and never expected to receive anything.

HMRC argued that nonetheless the fees were taxable income. The taxpayer argued that on a Ramsay approach