Approved Accounting – R&D Tax Credit Experts
If you are an SME in the food and drink industry and are pioneering new products, moving aspects of your service online or seeking more sustainable ways to manufacture, then you could be eligible for significant amounts of funding through Research and Development (R&D) tax credits.
The food and drink industry has been massively impacted by both COVID and Brexit, which has led to many SME’s looking for innovative new ways to adapt their businesses in the face of adversity.
The good news is, that there is still a substantial appetite for producers to provide food and drink for consumers that is cheaper, healthier, fresher and more ethically sourced.
This means that there is ample opportunity for growth in the food and beverage industry, and HMRC recognises, incentivises and supports SME’s as part of its Research and Development (R&D) tax credits scheme.
Unfortunately, estimates suggest that only around 10% of eligible businesses are claiming R&D tax credits, with less than 1% of claims coming from food related businesses. These statistics clearly show that a number of food and beverage businesses are currently missing out on receiving the credit they deserve.
So, whether it’s discovering an innovative new way of crushing coffee beans, inventing some sugar-free sweets that can help clean your teeth or creating a thirst quenching organic flavoured craft beer; if you are an SME then why not see if your most recent development could be entitled to R&D tax relief?
Read on to find out if you are eligible for food and drink R&D tax credits and how Approved Accounting can help you make a successful claim.
Which food and drink projects qualify for R&D tax credit?
An important point to remember is that R&D Tax Credits are not exclusive to R&D food and drink companies. No matter what your SME actually produces, the projects which can be supported in relation to food and drink R&D are many and varied.
To qualify, your food, drink or brewery project must meet HMRC’s four-point checklist below in order to be eligible:
1. Your R&D project identified a technological advance in food and drink development
- You should, of course, be 100% certain that the solution isn’t already out there.
- The advancement should be for the benefit of your sector as a whole.
- The advancement may be in relation to a new product/process/service, or an improvement to an existing product/process/service. For example modifying a recipe to benefit those who are gluten-free.
- The advancement must be technological in nature and not merely cosmetic.
2. Your food and drink development project had to overcome technological uncertainty
- In order to come up with a solution, there must have been technological uncertainty to start with. To put it another way, the technological knowledge required to fulfil your aim simply didn’t exist before. You will be required to prove that the uncertainty existed.
3. You attempted to overcome the uncertainty as part of your project
- You will be required to detail your methodology, including experimentation and testing.
- You must show that the intelligence to overcome the uncertainty could only have come from within the course of your research, and not from existing knowledge or capability.
4. The solution could not be reached by another competent expert
- You will need to explain why the solution could only be solved by your team of experts within the course of your project. If your advancement could have been easily worked out by another professional in your field, it will not qualify.
How does food and drink R&D tax relief work for SMEs?
SME tax relief for food and drink development can claimed in one of two ways:
1. Enhanced expenses relief
Under the R&D scheme, you can claim an extra 86% of eligible expenses from your yearly profit before Corporation Tax.
Allowable R&D expenditure includes:
- Employee salaries and NI contributions – this includes support staff as well as technical staff, as long as the work they undertake is directly for the project.
- External agency, freelancers and subcontractor costs – you can claim 65% of the cost of hiring external staff to work on your software project.
- Materials – this includes physical materials, consumables, utilities and software licences, as long as the project takes up a reasonable share of its usage.
2. Tax credit
If your company is making a loss then it can claim an R&D tax credit at the rate of 10%. This increases to 14.5% for R&D intensive SMEs, i.e. those whose qualifying R&D expenditure is 30% or more of their total expenditure.
It is important to note that here the tax credit might not always be the best course of action. It always pays to seek professional advice so you make the most profitable decision for your business.
Claim Your R&D Tax Credits Today
Claiming for R&D Tax Credits can be complex, but don’t let that you put off applying. At Approved Accounting we specialise in dealing with R&D Tax Credit claims and can offer advice to make the process simpler for you.
How do I make an R&D tax credit claim?
If you would like to make a food and drink R&D claim, then this must be submitted to HMRC with your annual company tax return along with any supporting documentation. Claims can be made up to two years after the completion of a qualifying project. Claims are typically reviewed and paid out within 28-days.
Can craft brewers claim R&D tax credits?
Regardless of how niche your sector is, as long as you can show innovation within your industry then you can qualify for Research & Development (R&D) tax credits. So if you are a small craft brewers and are looking to add fresh new flavours of craft beer to your current offering in order to remain competitive, then you can apply for the R&D tax credit scheme.
What does it cost?
We will only take a commission if your food, drink or brewery R&D claim is successful, based on the tax benefit you receive. Our standard rate is 15%, however, depending on the size of the claim we will be pleased to negotiate that with you.
R&D Tax Credits – Frequently Asked Questions
What does R&D stand for?
R&D stands for Research and Development, and can be defined as any work that is undertaken by a company to advance science or technology. In the UK, HMRC rewards and incentivises R&D in various sectors through the R&D tax relief scheme.
What qualifies for R&D tax credit?
R&D tax credits are available to any company, large or small, that undertakes scientific or technological projects that advances its field as a whole. It could be in relation to a new product, service or process, or an existing product, service or process. This includes, but is not limited to, sectors such as bioscience, software development, manufacturing, food and engineering.
Do small businesses qualify for R&D tax relief?
Absolutely. Qualifying SMEs must have fewer than 500 staff and turnover no more than 100m EUROS or a balance sheet of no more than 86m EUROS.
How do you calculate the R&D tax credit?
First, you must establish your qualifying R&D expenditure. This is then multiplied by a rate of 86% to give you the enhanced relief amount. Profit-making businesses can use this to offset their Corporation Tax bill. Loss-making businesses can receive an R&D tax credit at a rate of 10% of their enhanced R&D expenditure. This increases to 14.5% for R&D-intensive SMEs, i.e. those whose qualifying R&D expenditure is 30% or more of their total expenditure.
How can I apply for R&D tax relief?
You apply for R&D tax relief as part of your annual corporation tax return. It can be made up to two years following the completion of a qualifying project.
What expenditure qualifies for R&D tax relief?
Qualifying R&D expenses include employee wages and NI contributions, subcontractor costs, materials, utilities (such as gas and electric), and software (providing that the R&D project claims reasonable usage). The nature of the expenditure can have an impact on the amount you can claim and in some situations the cost is restricted. You cannot claim for the expense of production, distribution, patents or trademarks.
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