Reacting to ever-changing consumer demands and market pressures requires constant innovation, and companies within the food & drink sector may have been under great pressures to adapt their operations accordingly over recent months.
The UK Government strongly emphasises and supports the need for businesses to continually innovate, as innovation often has a positive impact on the economy, productivity and occasionally sustainability. The Government’s R&D tax credit scheme is therefore one incentive which most companies, particularly those in the food & drink sector, should consider given the substantial monetary benefit potentially available.
A common misunderstanding is that this relief is just for pure scientific research in a lab, this is not the case. Other development such as design, engineering, software etc. can also qualify for R&D tax relief.
Examples of activities undertaken by innovative food and drink firms that could qualify are:
- Using science or technology to develop new products
- Redeveloping existing products to improve the shelf life or adapt the nutritional value
- Improving the manufacturing process in order to achieve greater outputs and efficiency
There is a complex set of conditions to consider when deciding whether expenditure qualifies for the additional tax relief, and the rate at which relief is given is dependent on various factors. Lossmaking companies, both SME and large, can generate cash payments from HMRC following the successful submission of a R&D claim.
When assessing if your company should consider an R&D claim, we would strongly suggest obtaining professional advice, however the following rules of thumb are worth being aware of:
- Ensure you are comfortable that each project where R&D is being claimed meets the innovation tests;
- Identify the technological or scientific uncertainties that were tackled as part of your R&D work and ensure these are realistic / recognisable as genuine obstacles that were overcome;
- Ensure evidence is collated and advice from an experienced R&D practitioner is sought to allow the claimed R&D position to be defended and penalties resisted;
- Ensure evidence of your SME status is collated should a claim for R&D tax relief be made as an SME;
- Ensue the right allocations of qualifying expenditure are included in the claim in accordance with specific R&D tax legislation.
In short, make sure you prepare your claim with the relevant care and attention that HMRC will expect. Having advised many clients in the food & drink sector on their successful R&D claims, AAB’s Innovations Team is well placed to provide expert technical advice on any potential R&D claims your firm may qualify for.
If you would like more information or want to discuss R&D claims, please contact a member of our dedicated Food & Drink Team.
Find out more about how we work with the Food & Drink sector here.