On 6 August 2026, the First-tier Tribunal dismissed Tanglewood Care Services Limited's appeal against HMRC's rejection of an £880,286 R&D tax relief claim. If you run R&D tax claims in care, health, or another operationally-driven sector, that headline alone is probably enough to make you want to check your own claim against it.
It's worth reading properly rather than reacting to the outcome. The tribunal didn't side with HMRC on every point; it rejected parts of HMRC's own argument as too narrow, which makes this decision more instructive than a simple "care homes always lose" summary suggests.
What Tanglewood claimed for
Tanglewood claimed £880,286 in enhanced R&D expenditure for the year ended 31 January 2021. This appears to be their only R&D tax credit claim; the value of their claim in terms of cash credit or reduction in corporation tax is not specified in the decision.
The claim covered infection-control work carried out across seven residential care homes during the Covid-19 pandemic, including:
- staffing arrangements and staff segregation
- visitor policies and restrictions
- admissions procedures
- PPE procurement
- compliance procedures for operating care homes safely during a public health emergency
This was genuine, difficult work carried out under real pressure with no rulebook to follow. The question for the tribunal wasn't whether it mattered, but whether it met the legal definition of R&D.
Where the tribunal agreed with the claimant
HMRC's position was that Tanglewood's work was purely operational and never got close to qualifying as R&D. The tribunal didn't fully accept that, and two findings cut in claimants' favour.
On what counts as a project, HMRC suggested Tanglewood's response wasn't structured enough to count. The tribunal disagreed: a project doesn't need a formal, documented plan. It's enough to show "a coordinated programme of activity involving information gathering, review and implementation directed towards a defined objective."
On what counts as an advance, the tribunal confirmed that "advances may arise through the resolution of uncertainty affecting capability as well as knowledge, and that a project is not excluded from consideration merely because its individual components are already known." Combining familiar elements in a new way can still qualify, provided it advances capability in a genuine field of science or technology. This is the foundation of a “systematic uncertainty”, where all the components are known but the method of combining them to achieve your goals are not.
This isn't a case where HMRC was simply right and the claimant simply wrong. Tanglewood's understanding of what a project is and how an advance can arise was largely correct. The claim failed elsewhere.
Where the tribunal agreed with HMRC (and the claim failed)
The tribunal found Tanglewood's objective was to work out how best to deploy, balance and manage infection-control measures within its own care homes, not to advance knowledge or capability in a wider field. The work did not produce an advance beyond the company's own operations.
The uncertainties were real, but the tribunal described them as "predominantly operational and managerial in character," covering staffing, visitor policies, admissions, resident wellbeing, PPE procurement and the practical running of care homes during a public health emergency. None of that is scientific or technological uncertainty in the sense the legislation requires.
The tribunal also noted the absence of evidence from a competent professional in a relevant field, such as virology, epidemiology, infectious disease transmission, or infection science. The Tanglewood team were experts in care home management, which fit more with the social sciences; the tribunal noted that social sciences are specifically excluded from qualifying.
Tanglewood's team was honest and cooperative, and nobody doubted the work mattered. It simply didn't meet the definition of R&D.
Innovation isn't the same as R&D
This is the part of the decision worth sitting with even outside the care sector. Plenty of businesses moved fast during Covid, working out safe operating procedures before official guidance caught up, and plenty more routinely solve operational problems ahead of regulation as a matter of course.
Doing something before anyone else requires you to isn't, on its own, R&D. That work has to translate into a technological or scientific advance that benefits the field generally, not just a solution that gets your business through a difficult period.
Tanglewood doesn't appear to have set a baseline against existing knowledge in its field at the time, and it couldn't be reconstructed after the fact. Establishing your field and recording that baseline in your technical report is good practice for exactly this reason.
HMRC's scrutiny of specific sectors
Tanglewood isn't an isolated case. In August 2023, HMRC sent a one-to-many letter to companies in the care and nursing home sectors, warning that some R&D claims it had seen were based on "normal day to day activities" rather than qualifying R&D. Tanglewood is, in effect, that scrutiny being tested in a tribunal.
The tribunal decision doesn't mention an adviser acting for Tanglewood, but this is the backdrop the case sits against, after years of unaccredited advisers encouraging claims in sectors where qualifying R&D was and continues to be unlikely.
What this means for your own claim
Rather than reacting to the outcome, it's worth testing your own claim against the questions the tribunal asked here:
- What field of science or technology is your project in?
- Do you have the testimony of competent professionals in the field?
- Can the R&D on your claim be described as an advance in the field, rather than a solution to a problem internal to your business?
- Is the uncertainty you're claiming for genuinely technological or scientific, or is it operational and managerial?
None of this means operationally-driven sectors like care, hospitality and logistics, are excluded from claiming. The tribunal didn't say that; it says these sectors have to clear the same bar as any other. Our guide to HMRC's definition of R&D is a good place to test your own project against the criteria in more detail.
If a claim rests on solving an internal problem well, rather than a documented technological or scientific advance, it's worth a second look before it's ever tested the way Tanglewood's was. Get in touch with Tax Cloud and we'll help you review the technical case behind your claim before you file.
