Food manufacturers missing out on R&D tax relief
Automated production line in modern food factory. Ravioli production. People working.
Food and drink companies could be missing out on tens of thousands of pounds of R&D tax relief with just 1% of all R&D claims last year coming from the food and drink industry.
According to Research and Development Specialists (RDS), an expert in helping companies to navigate the Government scheme, the number of food companies claiming R&D tax credits in 2022 increased versus the year before in the published statistics, however the average claim value sits in the lower quartile in terms of claim amounts at around €21,573, likely as a result of the Covid pandemic.
In 2022 there were 810 accommodation & food R&D SME claims, amounting to 1.03% of the total 78,825 claims. The claims value in this sector totalled approximately €17.4 million – just 0.4% of the €4.89bn total.
Due to time constraints, lack of awareness and doubts around eligibility or the legitimacy of the incentive, there are thousands of companies that are not currently taking part in the scheme.
RDS is reaching out to firms after numerous successful claims for similar businesses, most of which had researched and developed new products or production processes.
RDS successfully claimed £55,000 last year for a well-established company with 15 years history of supplying process and packaging equipment to the growing craft brewing industry, after the fast growth of canning within the brewing industry led to the business developing their own bespoke beer canning system for new and existing customers.
Mark Joyner, MD at RDS, based in the North of England, wants to demystify R&D in a bid to reach more food manufacturing firms that could benefit from a cash influx of hundreds of thousands of pounds.
He said: “We’ve previously had success within the food and beverage sector, finding that companies working in this area have invested in qualifying activities like conducting research into health and ingredients or developing new equipment or processes to improve the scale, speed or efficiency of manufacturing, bottling, packaging or canning. The research and development related to this then makes them eligible for tax credits, but that’s not widely known. Lots of companies are missing out.”
Examples of R&D for the food and drink industry that would qualify include:
- Developing a new food or beverage product
- Creating new chilling and preservation methods to speed up production without affecting the texture of a product
- Experimenting with reformulation to improve nutritional requirements
- Developing new meat-free or free-from product lines
- Creating sustainable, eco-friendly living environments
- Improving functionality of product packaging to increase shelf life, improve sustainability and recyclability or reduce costs
Any UK limited business can claim. There are no restrictions on the type or size of business although there are different types of R&D scheme depending on whether you fit HMRC’s guide as being an SME or large company.
Mark Joyner added: “If I were to say to you, I’ll give you £46,347 for your business, I’m sure there would be lots of things that, as a business owner, you could do with that money. That figure represents the average amount of a successful claim through the HMRC R&D Tax Incentive in 2022. It is not a scam or a way to play the system, yet for many reasons, companies that are eligible are not claiming the money to which they are entitled.”
