With the UK’s enduring love for food and drink, it’s not surprising that the industry is constantly buzzing with exciting innovations. Food and beverage businesses are always researching, developing, and revolutionizing different aspects of the sector. In fact, statistics show that the number of food companies claiming R&D tax credits in 2022 increased compared to the previous year. However, due to the impact of the COVID-19 pandemic, the average claim value in this sector currently sits in the lower quartile at around €21,573.
In 2022, there were 810 accommodation and food R&D SME claims, accounting for only 1.03% of the total 78,825 claims. The claims value in this sector totaled approximately €17.4 million, which is just 0.4% of the staggering €4.89 billion total. The HMRC Research and Development Tax Scheme was established to encourage business innovation and stimulate the economy by supporting firms in bringing new products and services to market. However, many companies, particularly those in the food and drink manufacturing industry, are not participating in the scheme due to time constraints, lack of awareness, or doubts about eligibility.
To address this, Research and Development Specialists Ltd (RDS), an expert in navigating the government scheme, is reaching out to firms in the food and drink sector. RDS has already helped numerous similar businesses successfully claim R&D tax credits, most of which had undertaken research and development for new products or production processes. For instance, last year RDS secured a £55,000 claim for a well-established company supplying process and packaging equipment to the growing craft brewing industry. The company developed their own bespoke beer canning system in response to the fast growth of canning in the brewing industry.
Mark Joyner, MD at RDS, aims to demystify R&D to reach more food manufacturing firms that could benefit from a substantial cash influx. He explains that many companies in the food and beverage sector have invested in qualifying activities, such as research into health and ingredients, or the development of new equipment or processes to improve manufacturing, bottling, packaging, or canning. These research and development efforts make them eligible for tax credits, but this information is not widely known, causing many companies to miss out on this valuable opportunity.
But what exactly is R&D? Research and development tax credits are a highly valuable government incentive that rewards UK businesses for investing in innovation. It provides a powerful source of funding for businesses looking to grow and develop new products, services, procedures, and internal systems. Contrary to popular belief, qualifying for R&D tax relief does not require a business to involve people in lab coats or scientific research. Any type of research and development can qualify for tax relief. In the food and drink industry, examples of qualifying R&D include developing new products, creating preservation methods, experimenting with reformulation, developing new product lines, creating sustainable living environments, and improving product packaging functionality.
Eligibility for R&D tax relief is focused on the research project rather than the type of business. Any UK limited company can make a claim, regardless of size or sector. There are different types of R&D schemes depending on whether a company qualifies as an SME or a large company, with specific criteria for each. For SMEs, a company must have fewer than 500 employees and a turnover of less than £85 million or a balance sheet total of under £73 million. SMEs enjoy an additional 130% deduction on their eligible R&D costs when calculating taxable profit.
To make a successful R&D claim, the project must be related to the company’s trade and demonstrate an advance in science and technology. It should involve overcoming uncertainty that cannot be easily resolved by a professional in the field. It’s important to note that the project does not have to result in a finished product; the research and development phase alone qualifies for tax relief.
So, how does a business claim the money? For profitable companies, the benefit is applied as a reduction in corporation tax. If the claim is for historical R&D activities, the money will be claimed back as a repayment of overpaid corporation tax. For companies operating at a loss, the R&D claim can increase the loss arising, which can then be set against prior and future profits or turned into a cash repayment through HMRC’s ‘surrender’ process.
While R&D tax credits may seem too good to be true, they are a legitimate government-backed incentive to encourage innovation and have been available in the UK since 2000. However, the intricate details and criteria involved in making a claim can be overwhelming. This is why engaging an R&D specialist like RDS can help simplify the process and alleviate the stress of claiming. RDS is transparent in its approach, providing full sign-off for a claim at various stages of the process. Their costs are only recovered when a successful claim is submitted, approved, and credited. Building trust and working in partnership with clients is their top priority.
The potential benefits of R&D tax relief are substantial, with an average claim amounting to £46,347 in 2022. It’s not a scam or a way to game the system; it’s a legitimate opportunity for eligible companies to access funds they are entitled to. However, many businesses are either unaware of the scheme, too busy to explore it thoroughly, or skeptical about its legitimacy. RDS aims to address these barriers and help businesses in the food and drink sector unlock the financial support they deserve.
For more information on R&D tax relief, visit the Government’s website here
Mark Joyner concludes by highlighting the importance of claiming R&D tax credits and the significant impact it can have on a business. With an average claim amount of £46,347, such funds can be a game-changer for any business owner. RDS aims to simplify the process and take the burden off busy accountants, senior teams, or business owners. By working in partnership with clients, RDS ensures full transparency and delivers a successful claim that maximizes the benefits available. Discover more about RDS and their services at randdspecialists.co.uk/](https://randdspecialists.co.uk/.
