Claiming R&D tax credits for the food and drink industry
Recent figures from HMRC have suggested that the number of businesses claiming R&D tax relief is on the rise, but companies in many industry sectors are still missing out on the rewards available for innovative work.
The food and drink industry is a typical example. Many organisations assume that unless they are paying scientists to slave away in laboratories, the activity they’re engaged in doesn’t qualify as research and development. This, however, is not the case.
A whole host of projects carried out by companies in the food and drink industry are eligible for R&D tax credits. Take the development of gluten-free and lactose-free products, for example. There is continual work going into producing more and better foods for those with intolerances, much of which would qualify for the relief. Other examples include:
- The development of lower-salt, more nutritious ready meals
- Research into foods that require less sugar but maintain their taste
- Development of processing and packaging solutions that improve shelf life
Does your activity qualify?
With the average claim around the £53,000 mark, R&D tax credits represent a significant cash injection, particularly for small and medium-sized businesses (SMEs). The government guidelines on qualifying activity are fairly vague with good reason – they aim to encourage all kinds of businesses from various industry sectors to apply.
Eligibility focuses on the attempt to make an advancement in knowledge through the resolution of technological or scientific uncertainties. These uncertainties should be those which a competent professional in the field could not readily resolve.
How to claim
Claiming a tax benefit is never as straightforward as it seems, so it’s always best to speak to a specialist R&D tax advisor for help.
The first step is to work out the costs that are directly attributable to the project. These might include staff wages, sub-contractor costs and utilities. Only 65 per cent of sub-contractor costs can be claimed for, and you’ll need to identify the percentage of an employee’s time (and therefore wage) that went into the activity.
This must then be totalled and the correct amount of relief applied. For SMEs – those with under 500 employees and an annual turnover of less than €100 million – the relief granted equates to 26p for every £1 spent, which is a significant benefit.
These figures must then be submitted on your Corporation Tax form, alongside your cost breakdown and a brief summary of what the project sought to achieve and how the uncertainties were overcome.
If you have a business in the food and drink industry and feel that you have undertaken qualifying activity, you can obtain help with R&D tax solutions by speaking to a specialist tax advisor. It could make a substantial difference to your finances.