Food firms urged to claim tax credits for R&D
The idea that the recovery of R&D costs is the sole preserve of pharma and blue chip companies is “a myth that needs to be shattered”, according to RD Tax Solutions. The reality is that small and medium-sized enterprises accounted for more than 80% of all UK R&D claims in the 201314 tax year, the tax advisory firm said.
RD Tax Solutions cited the example of a food processing company that recently received a tax credit windfall. After carrying out an investigation and identifying qualifying activities, RD Tax Solutions built up a profile of costs incurred by the supplier and sent a breakdown to HMRC.
£160,000 of R&D-related expenditure
The costs amounted to just over £160,000 of R&D-related expenditure over two years and included heat testing, ingredient molecular reaction testing, flavour development time-scaling, oxygen exposure time-scaling and bespoke product ‘picking’.
This activity was subsequently deemed to have advanced knowledge in the food processing field, making it eligible for R&D tax relief. Within a couple of months, the owner received almost £40,000 of tax relief –about 25% of the total R&D costs.
“The complexity of R&D tax credits, coupled with constantly changing legislation, means that the majority of companies undertaking R&D activity in the food manufacturing industry are not making claims,” said RD Tax Solutions md Mark Tighe.
Missing out on a tax windfall
This means that they could be potentially missing out on a tax windfall of thousands, or even tens of thousands of pounds, he explained.
“Clearly we're not talking pocket change here. In fact, our average claim is in excess of £42,000. In some cases, the tax relief available to the claimant can extend to approximately 30% of the initial investment undertaken by a business in research and development,” Tighe said.
“Ultimately, what matters is not the sector or size of a company but that the company in question is developing new products, services or systems – or materially improving existing ones.
“If it is, then R&D tax credits are available to be set off against a corporation tax bill or be claimed as a cash sum paid back to a company by HMRC.”
