R&D tax credits for food and drink manufacturers
When it comes to innovation that qualifies for research and development tax relief, many businesses assume that their projects aren’t eligible. Despite regular promotion, companies across the UK believe that qualifying R&D projects are the domain of pharmaceutical and technology companies. But in reality, there are organisations in a wide range of sectors that can benefit.
For example, R&D tax credits in the food industry are available, for those companies looking to provide products that are healthier, free from allergens or increased shelf life. Here, we take a look at what drives development, and what R&D looks like for food and drinks manufacturers.
What initiates change in the food industry?
Several factors contribute to the need for research and development in the food industry. These include commercial factors such as the need to improve shelf-life of a product, legal changes such as the 2016 sugar tax and consumer demands such as a need for gluten or lactose-free products.
There are also issues around ethics as consumers become more aware of concerns around animal welfare and – particularly in recent months – single-use plastics used in packaging. All of these factors initiate the need for development if food companies are to keep up with trends and demand.
What kind of projects are eligible for R&D tax credits?
A wide range of undertakings can qualify for R&D tax credits. Food and drink development, where new products are being produced, is an obvious one, but others include:
- Experimentation with new equipment and processing methods
- Management of environmental factors such as temperature
- Revisions of recipes to meet newly-introduced standards or consumer demands
Let’s look at new equipment, for example. If a firm wanted to introduce a new piece of equipment to the production line in order to increase efficiency and reduce costs, this equipment may need to be specially modified and tested before being put to use. In such an instance, engineers would need to be employed to modify the equipment to the company’s specifications. It would also need to be tested with ingredients to ensure it produces consistent products, and during that time would require power.
All these things would be qualifying costs in a research and development tax credit claim.
How can food and drink firms claim?
The process for claiming R&D tax credits in the food industry is much the same as with other industries. Depending on the size of the company, a claim would need to be made as part of the Corporation Tax return either under the SME or RDEC scheme.
All qualifying costs would need to be gathered and added together, and the calculation for R&D relief made on the CT form. Supporting documents are also typically required to evidence the nature of the activity and demonstrate why it qualifies for the relief.
As with many tax-related issues, R&D claims can be complex, so seeking advice from a tax specialist is recommended. At R&D Tax Solutions, we have extensive experience with helping companies in a range of sectors make successful claims. Contact us today to find out how we can assist.