R&D Tax Relief and the Food & Drink Industry
By Zeinab Ahmed-R&D Tax Consultant
How can the food and drink industry take advantage of the R&D tax relief (R&DTR) scheme?
HMRC determines that R&D takes place when a project seeks to achieve an advance in a field of science and technology through the resolution of scientific or technological uncertainty.
This indicates that any UK food & drink company that is taking part in R&D can benefit from tax relief. However, the company does need to employ someone with a relevant background in the industry.
A good example could be a farm shop creating its own range of sauces. In isolation, this would not be considered technical enough, however, an SME company that employs someone with the technical skills to develop or improve the sauces would be eligible for the scheme.
Projects can include anything like new product development, reformulation of a product, improvement of taste, reduction of cost and waste, improving sustainability or even increasing health benefits. Technical variables to consider include food safety, PH levels, flavour and costs.
An important point to remember is that benefits don’t solely apply to food products – the development of new software and website integrations can also be considered.
Where are the current high levels of innovation taking place in the food & drink industry?
Many companies will explore reformulations to improve recipes for health benefits like sugar content and flavourings. There is a huge sustainability movement which includes the reduction of plastic and waste.
Other great examples of innovation include regenerative farming techniques, meat-free options, 0% alcohol drinks and even software development where businesses offer their unsold, surplus food in an attempt to reduce waste.
What support is offered through the R&DTR scheme?
The scheme is offered to SMEs and these can be differentiated as loss-making SMEs and profit-making SMEs.
If the company qualifies as an SME under the R&D tax legislation then up to 33p can be claimed back for every £1 of qualifying expenditure as a loss-making entity.
A profit-making entity can claim up to 26p for every £1 of qualifying expenditure.
What is the R&D tax relief claim process?
The tax relief claim process includes four main steps:
Company eligibility – is the company eligible for the scheme?
R&D projects eligibility – do the projects constitute as R&D?
Technical justification of the projects – gathering any technical details that are required.
Association of the costs to the projects.
Will this support be available post COVID-19?
Over the past couple of years, the tax relief scheme has become more generous and with the economy suffering, the government is even keener to support all industries.