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HMRC’s Research and Development tax credits scheme is designed to provide tax relief to UK companies that are undertaking innovation and development of their products and processes. It is a common misconception that R&D only relates to ‘white coat’ scientific research. The food and drink industry develops a vast number of new products and processes to meet consumer demand and to comply with regulatory requirements – many of these projects will qualify for R&D tax relief.
Qualifying projects must seek an advance in overall knowledge in a field of science or technology. You will need to show that there was uncertainty that competent professionals could not readily resolve and where solutions are not common knowledge. HMRC will want to know how your project represents an advance for the sector, rather than just your company.
They key to a successful claim is to demonstrate to HMRC that your project meets the criteria above and to quantify the qualifying costs (typically employee costs and consumables) associated with the project. We can help you record and deliver this information to HMRC.
Typical claims include:
Developing a new product, where extensive experimentation is likely to be required before producing at scale
Improvements to existing processes: for example, testing to minimise waste or spoilage of goods
Redesigning processes to comply with new legislation such as the new alcohol duties, ‘sugar tax’, environmental regulations or dietary and ethical concerns
The process of improving packaging or order processing
Small and medium sized companies can claim an additional 130% tax relief on qualifying expenditure on a defined project. This means tax relief of £437 for every £1,000 spent on qualifying R&D – compared to tax relief of £190 for standard business expenses.
If the company is loss making, there is the option to surrender these loses for an immediate tax credit of 14.5% – worth £334, whilst this is a lower amount of tax relief, the tax credit is an immediate cash payment.
The money received from HMRC in the form of R&D tax credits can be a great way to reinvest in your business to fund new machinery or expansion.