R&D tax credits for food, drink, beverage and breweries

For far too long, there has been a perception that you have to work in a lab, or be building the next big breakthrough in technology in order be able to claim R&D Tax Credits. But that’s simply not the case!

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.

Approved Accounting - R&D TaX Credit Experts

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.

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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?

R&D tax relief is comprised of two schemes, one aimed at SMEs (Small to Medium-Sized Enterprises) and one aimed at larger companies. Here at Approved Accounting, we specialise in R&D claims for SMEs, although we are well-versed in both schemes.

To qualify, your SME must:

  • have fewer than 500 staff
  • have a turnover of under £86m
  • should not be receiving state aid towards the project for which you are claiming

SME tax relief for food and drink development can be broken down into two components:

1. Enhanced expenses relief

Under the R&D scheme, you can claim an extra 130% of eligible expenses from your yearly profit before it is taxed, at the current rate of 19%.

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 the allowable loss can be surrendered for a tax credit at the rate of 14.5%, or, the loss can be carried forward and offset against future profits your company may make.

It is important to note that here the tax credit might not always be the best course of action. Whilst you will benefit from a cash flow improvement, the relief offered is at a lower rate. This is why it pays to seek professional advice so you make the most profitable decision for your business.

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Claiming R&D tax credits in the food and drink industry

R&D tax credits are commonplace in the food and beverage industry, due to global food issues, high modern standards and consumers that now demand an evolving and diverse range of food and refreshments.

This does mean, however, that almost any new or modified product can be “put on the table” as long as it has been through extensive research and development.

If you are developing new food and beverage products but have never made an R&D claim before, need advice or are looking to maximise your existing claims, then please contact us today.

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.

Recent changes to the SME cap on R&D credit

Up until 2020, there was no limit to the amount of R&D tax credit that SMEs could claim. Due to abuse of the system, the government made the announcement in the 2018 budget that the legislation would change from 1 April 2020. It stated that R&D tax credit would be limited to three times the company’s total PAYE and NIC liability for that year.

Fast forward to the Spring Budget of 2021, SMEs applying for R&D tax credits will be eligible to a maximum of £20,000 in repayments per year plus three times the company’s total PAYE and NIC liability. So, it’s slightly better news for SMEs when it comes to claiming R&D.

The recent changes could prove problematic for genuine claimants that don’t pay themselves a salary as a company director, or employ minimal staff. If this applies to you, then we strongly advise seeking our professional advice to avoid cash flow issues and ensure your claim is approved.

Make a successful R&D tax credit claim with Approved Accounting

Approved Accounting can help you to navigate food and beverage R&D scheme and make a successful tax relief claim. Should you choose to work with us, this is our tried and trusted process:

We will take a look at your company’s innovation and development projects and identify those that can be qualified as R&D.

We will consult with you and your experts, to understand the technical aspects and activities of the project(s).

We will help you to compile the fundamentals of the report to submit to HMRC.

We will review and analyse the expenditure for the qualifying project(s), then calculate your claim.

With your approval, we will submit the claim as part of your corporation tax return. There is no need for you to process anything, we will do it all on your behalf.

At Approved Accounting, we know the R&D scheme inside-out and will provide professional guidance to ensure the best chance of success. We will also save you valuable time and effort, so you can get back to doing what you do best.

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.

Contact us today and receive the R&D tax relief you deserve

Approved Accounting has extensive knowledge of R&D tax credits within the food and beverage industry, and has been successful in making claims for many SMEs. By undertaking F&B R&D, you are contributing a great deal to the economy and to individuals, so we are passionate about getting you the tax relief you deserve.

Why not get in touch with us to find out if your food and drink projects are eligible for R&D tax credits. We look forward to hearing from you.

R&D Tax Credits - Frequently Asked Questions

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.

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.

Absolutely. The government R&D scheme is comprised of two schemes, one for SMEs and one for larger businesses. SMEs must have fewer than 500 staff and turnover no more than £86m in order to qualify.

This is not a straightforward question! The difficulty here is not in the calculation of the credit but in identifying the allowable costs and to what extent these costs can be included. Once this figure is arrived at this is multiplied by a rate of 130% to give you the additional enhanced relief. It is here where some expert tax planning is required as the there are a couple of options available, you can either carry losses forward to offset against future profits, offset against current tax liabilities or use these losses for a payable tax credit at a rate of 14.5%.

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.

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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