The recent Environmental Services v HMRC judgement (dated 10 September 2026) follows a trend of First Tier Tribunal judgments into the qualifying status of R&D projects.

What happened?

Environmental Services Ltd (‘Environmental Services’) is a provider of waste collection and transportation services. The company submitted an R&D claim based on in-house development carried out to improve the quality and efficiency of their waste management. Environmental Services described these two projects as revolving around managing practical problems within waste transport and disposal due to customer requests, changing waste regulations, and logistics issues. In approaching these problems, staff would research existing strategies and consult professionals in the wider industry before developing their own solutions.

To qualify for R&D tax relief, a company must be carrying out a project that represents an advance in a field of science or technology, through the resolution of scientific or technological uncertainties. HMRC therefore challenged Environmental Services’ claim on the basis that these activities did not constitute a valid project, and that no genuine advance in technology was being sought.

The outcome

The tribunal held that the information provided by the competent professional concerned practical issues encountered by Environmental Services and that no clear genuine technological advance had been established.

The tribunal also referenced the earlier Hadee Engineering Co Limited v HMRC judgment in stating that a project requires documentary evidence of a plan in place to resolve scientific or technological uncertainties. (In this case Environmental Services had a plan, but this was to resolve the practical issues concerned with waste management rather than technological uncertainties.) It was held by the tribunal, however, that this plan does not necessarily need to be written down but that experimentation on its own is not sufficient, and that in this case the primary purpose of the projects was to enable Environmental Services to deliver on waste management contracts.

It was also held that the existing research carried out by Environmental Services to identify existing solutions and speak with other professionals in the industry was not sufficient for establishing a technological baseline. The tribunal noted the work carried out was largely reactive in developing responses to problems as they arose rather than a systematic approach to advancing the field.

On a whole other note was the financial aspect of the claim. Environmental Services was unable to explain the percentages of staff time involved in the claim and had limited evidential basis for the costs claimed. Many of the invoices for costs included in the claim were described as encompassing routine maintenance, management services, and other seemingly normal operational costs that would not qualify for the R&D tax relief. This included payments for the hire of equipment used in the project which had no basis for being claimed.

Case take away

This case demonstrates the importance of clearly establishing project boundaries for the purpose of R&D tax relief, and how this differs from wider commercial projects. Whilst on this occasion these projects were unlikely to contain any qualifying R&D elements, a very common approach made by competent professionals is to focus on the intended wider commercial purpose of projects, rather than to describe the underlying science or technology involved to overcome the uncertainties being faced. Despite this wider commercial basis often being the purpose for carrying out qualifying R&D, the boundaries of any qualifying R&D conducted need to be clearly separated and explained by referencing the underlying scientific or technological basis.

Contact us

Dealing with an R&D enquiry or looking for some guidance on eligibility criteria? Feel free to reach out to us via rdtax@ct.me.