Food firms urged to claim tax credits for R&D

By Noli Dinkovski

- Last updated on GMT

Is your firm missing out on claiming for R&D tax credits?
Is your firm missing out on claiming for R&D tax credits?

Related tags: Taxation in the united kingdom

Food manufacturers are being urged to claim back research and development (R&D) tax credits after Her Majesty's Revenue and Customs (HMRC) figures revealed just 1% of potentially eligible UK firms were doing so.

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.”

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