In M&C Educational Training Services Ltd v HMRC [2025] TC09709, the First Tier Tribunal (FTT) found that expenditure on an e-learning training platform related to an advance in education, a social science, and did not qualify as Research and Development (R&D) expenditure for the purposes of claiming relief.
In 2015, M&C Educational Training Services was incorporated to offer training and practical sessions for part-time students in work placements in the metallurgical and materials science field.
- Since 2016, no other UK college or university has offered formal pre-university qualifications in this field.
Between 1 July 2019 and 30 June 2021, the taxpayer developed and put in place an e-learning platform via Moodle (an open source learning management system).
- The company's focus was on creating new, innovative teaching materials and methodologies addressing the lack of vocational training and a depleting workforce in metallurgy.
- The online learning platform enabled students to complete a Level 3 qualification, equivalent to GCSE, and was unique in offering this.
- M&C Educational Training Services engaged with manufacturing engineering professionals to determine the needs of the industry and then created courses to address those needs.
- The project made metallurgical science accessible to a broader audience, regardless of their location.
- The company's training portal received endorsements from professional bodies. Feedback from industry mentors and professionals also demonstrated the value the training had in the metallurgy sector.
In its returns for the accounting periods ending 31 July 2020 and 31 July 2021, the taxpayer claimed relief for R&D expenditure.
- HMRC denied the claims on the basis that the expenditure did not relate to qualifying R&D.
- For these claims, the activities that could be treated as R&D were defined in the Business, Energy, Innovation and Skills (BEIS) Guidelines.
- The BEIS Guidelines were replaced by the Department for Science, Innovation & Technology (DSIT) Guidelines for accounting periods beginning on or after 1 April 2023.
- The taxpayer considered that the project aligned with the guidelines and that HMRC lacked the technical competence needed to understand metallurgy and the project's significance.
- It also engaged with HMRC in the Alternative Dispute Resolution (ADR) process, but felt this was one-sided and again lacked the technical competence needed to understand the details of the claim.
On 16 May 2023, HMRC issued Closure notices for their decision to refuse the R&D claim and assessed the tax due. The taxpayer Appealed to the First Tier Tribunal (FTT).
The FTT found that:
- The expenditure was not made in relation to a qualifying R&D activity as defined by the guidelines.
- It was accepted that metallurgy met the definition of a science under the guidelines. The issue was whether the taxpayer had in any way furthered publicly available knowledge or had advanced capabilities in the metallurgy field.
- The taxpayer had sought to increase and improve the workforce in the metallurgy field by using new ways of educating and training them. However, this was done using existing publicly available knowledge and existing technical capabilities.
- The taxpayer's advances were in education, a social science. It had not made an advancement in metallurgy within the meaning of the guidelines.
- It did not have a role in considering the taxpayer's complaints about HMRC's conduct, whether as part of the ADR procedure or otherwise.
The appeal was dismissed.
Useful guides on this topic
Research & Development tax reliefs
What is R&D Relief? How does it work? Why does the size of the company matter? What is sub-contracted R&D? How do I write an R&D Report?
R&D Zone (take a tour)
R&D Zone aims to provide you with practical know-how and support in putting together an R&D claim.
R&D Zone: Do I have a valid R&D Claim?
Do I have a valid R&D Claim? What conditions do I need to meet? What form of relief can I claim?
R&D: Its meaning under DSIT Guidelines
What is Research and Development for tax purposes? What is the meaning of Research and Development for Tax? What are the Department for Science, Innovation and Technology (DIST) and formerly BEIS, guidelines on Research and Development?
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