A training services provider sought R&D tax relief on the basis it was helping to develop the metallurgy sector.
HMRC disagreed. And that may seem an obvious outcome, but it highlights interesting points about technical specialism.
What happened?
M&C Educational Training Services partnered with universities to provide training and practical sessions within the field of metallurgy.
To support this, the Company developed an e-learning programme for metallurgical training via an established online portal called Moodle, which provided students with course materials and practical education. The Company then claimed R&D tax relief on these costs over two separate accounting periods, on the basis that developing this programme sought to advance the field of metallurgy.
Rather than referencing any specific advancements within the field, the Company emphasised the commercial demand for greater metallurgy training within the industry, noting a shortfall in skilled engineers. The basis of the claim centred on the lack of any existing specialised education and practical training within the field. The Company argued that they sought to advance the field by better upskilling workers and providing opportunities for the sector that did not previously exist through the creation of these improved training programmes.
HMRC challenged the claims on the basis that the project did not genuinely seek to further overall knowledge or capability within metallurgy. This was because - while the Company clearly operated and employed competent professionals in the fields of metallurgy and materials science - this project did not contribute to achieving an advance in new knowledge or capabilities.
The outcome
The tribunal agreed with HMRC’s view and dismissed this appeal on the ground that the project did not represent an advance in overall knowledge or capability in a particular field of science or technology. The tribunal referenced the requirement for a project to encompass a set of activities to seek an advance through the resolution of scientific or technological uncertainty, which was not clearly demonstrated through the Company’s work.
Specifically, the tribunal differentiated between the development of unique, new and innovative methods of providing training to further the knowledge of individuals, with those that sought to advance overall knowledge and capabilities.
The tribunal also mentioned that the specific advance and uncertainties referred to were linked with the field of education, which is not a valid field of science or technology as social sciences are specifically disallowed according to the BEIS guidelines.
None of the activities described by the Company would have resulted in new knowledge or capabilities within metallurgy. These activities instead related to meeting industry challenges and improving vocational training within the field, which are not relevant for the purposes of R&D tax relief.
Case take away
This case differed from other recent R&D tribunal cases in that it concerned project eligibility rather than one of the more technical, subjective areas of R&D tax legislation.
It demonstrates the need to understand the fundamentals of the qualifying criteria and the importance of seeking professional advice before deciding to make a claim. Based on the Company’s descriptions of the project, it’s fair to say that the case should never have gone to tribunal, even without considering the relatively small claim value of less than £9,000 across both periods.
Despite the outcome, the case reflects a common theme within R&D tax enquiries, with HMRC previously facing criticism for rejecting even very robust claims on the basis that there is no scientific or technological advance.
A fair point made by the Company during the tribunal was that HMRC do not employ staff qualified within technical fields. Whilst it is clear from these descriptions that the project did not qualify, this remains a valid concern for projects that are less clear cut. Whilst competent professional testimony remains essential, where officers disagree without understanding the field of science or technology, the scope and significance of qualifying projects to the overall field could be misunderstood or lost.
Contact us
If you're dealing with an R&D enquiry or looking for some guidance on eligibility criteria, reach out to us via rdtax@ct.me.