Realbuzz Group Ltd v HMRC [2025] UKFTT 493 – What It Means for Capital Allowances
Although the recent First-tier Tribunal decision in Realbuzz Group Ltd v HMRC [2025] UKFTT 493 (TC) focused on Research and Development (R&D) tax relief, it highlights important points that could apply to other areas of tax relief. In particular capital allowances.
Case Background
Realbuzz Group Ltd a company in the fitness sector submitted a claim for £335,452.57 in R&D tax relief for its 2020 accounting period. HMRC chose not to open an enquiry during the standard timeframe. However, after reviewing the company’s return for the following year, HMRC concluded that much of the earlier claim may have been invalid and issued a discovery assessment to claw back the relief.
Realbuzz challenged this, arguing that HMRC had all the information it needed to question the claim earlier, but failed to act during the permitted enquiry window.
Legal Framework: Discovery Assessments
The powers used by HMRC come from Schedule 18 to the Finance Act 1998:
- Paragraph 41 allows HMRC to issue a discovery assessment if it “discovers” that tax has been underpaid or a relief has been wrongly claimed.
- However, Paragraph 44 restricts this power: HMRC cannot issue a discovery assessment if an officer could reasonably have been expected to be aware of the issue from information already provided in the tax return or accompanying documents at the time.
In short, HMRC can only use discovery assessments when something genuinely new comes to light—not if they simply overlooked information they already had.
Tribunal’s Decision
The Tribunal sided with Realbuzz, stating that HMRC already had sufficient information during the original enquiry period to raise concerns about the R&D claim but failed to act. The attempt to use later-year information to justify a retrospective assessment was rejected.
This case reinforces that HMRC’s discovery powers are not unlimited and that there are clear legal safeguards in place to protect taxpayers who disclose all relevant information upfront.
What This Means for Capital Allowances
While the decision directly relates to R&D relief, the underlying principles also apply to capital allowances:
- Timely Disclosures Are Key
If a business provides full and accurate information about capital allowances in its tax return, and HMRC does not raise questions within the enquiry window, the claim is generally protected from being revisited. - Retain Key Documents
Proper records supporting capital allowances claims demonstrate that the taxpayer took “reasonable care” and gave HMRC the chance to raise queries. - Enquiry Windows Matter
Just like in this case, HMRC can’t issue a discovery assessment years later if the information was already available to them and they simply failed to act.
Lovell Consulting’s View
The Realbuzz case is a valuable reminder that disclosure and timing matter. Businesses claiming capital allowances should ensure their claims are well-prepared and well-documented. If HMRC does not challenge a claim within the allowed time, they may not get a second chance unless genuinely new information emerges.
This case offers helpful precedent when defending capital allowances claims that are challenged outside the normal enquiry period.
