HMRC just denied the appeal of an SME looking to claim R&D tax credits for their educational innovation, reminding claimants to be careful in assessing whether their advance genuinely qualifies for R&D tax relief.
It's a common assumption. Innovative educational content feels like R&D, especially when you're developing cutting-edge platforms or creating entirely new courses in technical fields. You’re widening the fields of science and technology for the next generation of workers, surely this would qualify…
But this recent First-Tier Tax Tribunal decision makes one thing crystal clear: innovation in how you teach is very different from advancement in what we know scientifically.
The M&C Educational Training case
M&C Educational Training Services Ltd was incorporated in 2015 after Bradford University closed its metallurgy department. The company identified a genuine gap in the UK market. Since 2016, no educational institution has offered formal qualifications in metallurgical and materials science at pre-university level with part-time and remote learning options.
M&C set out to fill this gap. They developed innovative metallurgy courses and e-learning platforms using Moodle, an open-source system. They created unique educational content including web seminars, practical lectures, and hands-on training. They converted metallurgical microsections into digital photographs for educational use. They employed "action research" methodologies to engage with manufacturing professionals and determine specific industry needs.
The results were impressive. They had endorsements from professional bodies like the Institute of Materials, Minerals and Mining (IoM3), the Institute of Cast Metals Engineers (ICME), and the Engineering Council. Industry experts praised their work. They were addressing a critical skills gap in UK manufacturing, helping employers retain key employees and formalise workers' knowledge through qualifications.
M&C claimed R&D tax relief for their 2020 and 2021 accounting periods. They sought additional tax deductions of ~£38,000 and ~£36,000 respectively, plus associated tax credits totalling ~£7,000.
HMRC rejected both claims following a compliance check. M&C appealed to the First-Tier Tribunal.
The M&C argument for qualifying R&D
M&C's case rested on several pillars. They argued they'd developed innovative e-learning platforms and teaching methodologies for metallurgical education. Their work addressed scientific and technological uncertainties in educational delivery methods. They'd created courses that didn't exist elsewhere in the UK.
They emphasised they were using established metallurgical investigation techniques and scientific principles, teaching these through innovative delivery methods. Their courses incorporated the latest advancements in materials science and metallurgical theory. They'd integrated knowledge from different fields, applying maths to workplace accuracy and introducing new methods in casting processes. Industry experts backed them up, explaining that their work was genuinely addressing a skills gap in the UK.
M&C argued their activities extended overall knowledge in metallurgy by making it accessible to a broader, more diverse audience. Their systematic approach to curriculum development, stakeholder engagement, and innovative delivery constituted R&D in the field of metallurgical science.
The tribunal's decision
The appeal was dismissed.
The tribunal accepted several facts. M&C had created innovative educational content and unique courses. They used novel teaching methods and filled a genuine skills gap in the industry. Metallurgy is indeed a field of science. The training had practical impact and was recognised by professional bodies.
But the tribunal ruled these factors weren't enough to meet HMRC’s definition of R&D.
The tribunal's reasoning was straightforward. All the activities M&C identified "comprise and/or are fundamentally linked to the provision of information, education and training." The uncertainties and advances M&C described were "advances in a social science, education, and not in a field of science or technology."
Social sciences, including education, are explicitly excluded from qualifying R&D under the BEIS Guidelines. M&C's work advanced educational delivery methods, not metallurgical science.
Here's the critical finding:
"There is no suggestion in any of the evidence or extensive submissions made that the appellant […] in any way furthered publicly available knowledge of any aspect of the scientific field of metallurgy/materials, or advanced capability in that field by a competent professional."
The tribunal emphasised that the uncertainties M&C faced related to meeting industry challenges due to lack of vocational training and the depleting workforce in metallurgy. These are advances in the field of education, not in metallurgy itself. The company did not develop new metallurgy techniques to teach students but optimised the teaching of existing techniques.
What counts as R&D for tax purposes?
R&D tax relief requires you to seek an advance in science or technology, not just an advance for your business. The legislation is strict. You need to be attempting to resolve scientific or technological uncertainty that a competent professional in your field couldn't readily resolve using existing knowledge.
The "competent professional" test is crucial here. Ask yourself: did an expert in your field gain new scientific or technological knowledge that didn't exist before? If you're making existing knowledge more accessible, more engaging, or better organised, that's not advancing the field itself.
Think of it this way. If an expert metallurgist reviewed M&C's courses, they'd recognise all the scientific content. They might admire the delivery method and appreciate the educational innovation. But they wouldn't learn any new metallurgical science. The advance was in pedagogy, not in the underlying scientific field.
The critical distinction: teaching vs discovering
Let's use a simple example. Creating an online course about machine learning, even with interactive elements, gamification, and adaptive learning paths, isn't R&D in computer science. You're teaching existing concepts in an innovative way.
Developing a new machine learning algorithm that solves a previously unsolvable problem? That could be R&D, provided you're facing genuine technological uncertainty that requires resolution.
R&D can exist within educational projects, but the advance must be in a qualifying field. If you're developing a fundamentally new software platform with novel technical features to deliver your training, that advance might qualify. But it would be R&D in software development, not in education. The educational content itself still wouldn't qualify.
M&C used Moodle, an open-source platform, which they populated with their own content and criteria. But Moodle already existed. Configuring and using it to deliver courses, even innovatively, didn't advance software development or any field of science or technology.
Common innovative projects in education
Developing e-learning platforms or LMS systems: Unless you're resolving genuine technological uncertainties in how the software functions, you're likely configuring existing tools. Even customising Moodle or building a bespoke platform using known techniques doesn't qualify if you're simply applying existing software development knowledge.
Creating innovative curricula or course content: No matter how technical your subject matter, repackaging existing knowledge into a curriculum isn't R&D in that field.
M&C created unique courses on metallurgical investigation techniques, practical metallography, and heat treatment processes. The content was scientifically rigorous and practically valuable. But it taught established metallurgical principles. You're not advancing metallurgy by teaching it better. You're advancing education.
Converting technical content into accessible formats: Taking complex scientific concepts and making them understandable for a broader audience is valuable work, but it doesn't advance the underlying science.
M&C's conversion of metallurgical microsections into digital photographs (ePhotographs) was innovative educational practice, not metallurgical research.
Building training delivery systems: Whether it's virtual labs, simulation environments, or interactive assessments, if you're using established technical approaches to deliver training, it's not qualifying R&D.
M&C used Zoom video conferencing, practical lab work, and "bring your own material" workshops. These were innovative delivery methods, but they applied existing technology and established teaching practices.
Addressing skills gaps in your industry: The tribunal was explicit on this point. Filling workforce shortages or knowledge gaps through training doesn't constitute R&D. The social or economic value of your work is irrelevant to the R&D test.
M&C had compelling evidence of industry need. Annual demand for 124,000 engineers and technicians. Companies hiring from overseas due to UK skills shortages. An aging demographic pushing demand for new personnel. None of this mattered for R&D tax purposes.
The pattern is clear: if you're making existing knowledge more accessible, it's not R&D in the underlying field.
When educational technology might qualify
There's a narrow path where educational technology projects can qualify, but you need to be advancing the technology itself, not just using it to teach.
For example, if you're developing genuinely novel AI for adaptive learning that solves technical uncertainties in how algorithms personalise content, you might have qualifying R&D. But the advance would be in computer science or AI, not in education. You'd need to demonstrate that you faced technological uncertainties that couldn't be readily resolved by a competent software developer using existing knowledge.
The innovation must be in the technology platform itself, and it must still meet all the standard R&D criteria. The technological advance needs to further publicly available knowledge or capability in that field of technology.
You can't claim for the educational content development, curriculum design, or the teaching methodology. Only the technological advancement work could potentially qualify.
Key Takeaways
- R&D tax relief requires advances in science or technology, not education about science
- Innovative teaching methods, no matter how cutting-edge, don't qualify as R&D in the subject being taught
- The test: would a competent professional in the scientific field gain new knowledge from your work?
- Repackaging or making existing knowledge more accessible isn't R&D
- Social sciences, including education, are explicitly excluded from qualifying R&D
Making sure your claim is compliant
If you're developing educational content, focus your R&D tax credit claim on any genuine technological advances in your delivery systems, not on the innovation in how you teach.
The advance must be in a qualifying field of science or technology, and you must demonstrate you're resolving scientific or technological uncertainty that a competent professional couldn't readily resolve.
If you're unsure whether your activities qualify, we can review your projects and help you identify legitimate R&D expenses. Get in touch to discuss your specific situation.
