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Research and Development Tax Relief – the opportunities available for food and drink businesses

HMRC released research and development (R&D) tax relief statistics in October which show the South West is outperforming the national picture.

Across the UK, the value of claims grew by 14% from 2015/16 to a total of £4.4bn in 2016/17. The South West grew by 28% over the same period to £230m. It also looks as though the region will continue to show strong growth in 2017/18 with the most recent figures, released in October, only £5m behind the previous year and there was still until the end of the year to claim.

So what does this actually mean to a food and drink business? The Government regards investment in R&D as crucial to economic success and R&D tax relief is designed as an incentive for UK companies to invest in innovation to improve efficiency and productivity. The relief can be extremely generous and enables the company in question to accelerate its R&D programme and invest a greater proportion of its profits into such things as hiring new staff or investing in new machinery.

Unfortunately, it is not possible to extract the full food & drink sector figures from the headlines. Whilst manufacturing accounts for over a quarter of all R&D claims, and the sector undoubtedly contributes to this figure, ‘accommodation and food’ contributes only 0.4% of the total – which is not so impressive!

The biggest challenge faced is that a lot of businesses don’t believe R&D relief would apply to them. However, it is proven time and again that it does. The scheme was launched in 2000 and since then, over 300,000 claims have been made overall and £26.9bn of tax relief has been claimed; all of which has contributed a significant cash flow boost to the claimants and is something that really shouldn’t be ignored, or put in the ‘too difficult’ or ‘too good to be true’ pile.

Areas that have led to successful claims in food and drink businesses have included, but are certainly not limited to:

  • Taste and texture improvements
  • Improvements in shelf life
  • Adapting for dietary requirements
  • Change of packaging to reduce environmental impact whilst maintaining shelf-life and organoleptic properties
  • Production issues due to seasonal variability
  • Eliminate allergens and additives
  • Filtration systems
  • Production issues with increasing volume whilst maintaining the final taste
  • Waste reduction
  • Reduction of salt, sugar and fat content

Failed projects are also eligible, in fact failure is a good indicator that there was R&D involved as the technological issues could not be overcome.

Under specific subcontractor arrangements, if you have worked in collaboration with other companies or employed them to help with the projects, this can also be considered as part of the claim.

As a firm we are committed to supporting our clients to make sure that we maximise claims made and relief value. If you think you may have undertaken work that could be eligible or are planning on doing so, get in touch with our specialist team: innovation@pkf-francisclark.co.uk

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FEATURING: Sarah Boyes
After graduating from Staffordshire University with an Honours degree in Mechanical Engineering Sarah spent a number of years in industry. Starting out as a manufacturing… read more
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