As a product developer you might think that undertaking research and development work is just part of your business. However, it’s worth looking at the possibility that you qualify for R&D Tax Credits for food businesses. It’s something we’ve helped a number of clients with – in fact, we’ve never made an unsuccessful application.
If your business qualifies as an SME under the R&D tax legislation, you can claim R&D Tax Credits. The amount you can claim depends on whether your business is profit-making or loss-making at the time of application.
- Loss-making entities can claim up to 33p in every £1 of qualifying expenditure and payments come in almost immediately from HMRC.
- Businesses making a profit can claim up to 26p in every £1 of qualifying expenditure realised as relief on your payable corporation tax, or as a cash credit. As there’s less urgency, it can take up to 28 days for the money to be paid from the claim date.
Who can benefit?
Any British food and drink company already investing in R&D can benefit from this tax relief. You must, however, employ an individual from a food science or manufacturing engineering background, or something similar. For example, if an SME employs someone with a technical or scientific skill and they develop or improve a food product this would be classed as eligible. Projects can be focused on new product development or reformulation of an existing product to improve taste, reduce waste, make cost savings, improve sustainability or increase/add health benefits.
How should you approach R&D Tax Credits for food businesses?
Depending on your company size, there can be differing approaches and benefits. For example, an SME will need to ensure it is a UK limited company subject to Corporation Tax. HMRC wants to see that your claim is genuinely pushing food or drink science or technology forward. It’s not paying you learn something the objective of the scheme is to encourage food and drink businesses to leverage professional expertise to support innovation.
When applying you’ll need to provide appropriate commentary and explanation on a problem and how it was solved. This is typically where Froghop get involved to help with applications. For example, a new range of drinks with new flavours isn’t claimable, but a drink product that contains a nutritionally beneficial ingredient that has been processed to mask an unpalatable taste would be claimable.
It’s important to note there is a period of two financial years from when the work was undertaken for claims to be made. This means there’s no additional work required in terms of undertaking a project, your company’s R&D/innovative work simply needs to meet the definition of R&D to make a claim. Consider both the in-house and external costs that you incurred with respect to R&D.