R&D tax credits are an appetising boost for the food and drink sector
R&D tax credits are often regarded as being relevant only to technical industries such as science and engineering. Not so. Thankfully this perception is now changing as many other industries realise that elements of their work sit under the research and development umbrella and can therefore be subject to tax relief.
Food and drink is one such sector where there has been an increase in R&D claims. According to the Food and Drink Federation, the industry contributes £28.8bn to the economy and is the biggest manufacturing sector in the country, larger than automotive & aerospace combined. Not small beer then! R&D is prevalent throughout the industry, and businesses are finally understanding that there is help available to facilitate growth.
What is driving R&D in the food and drink sector?
At RandDTax we have identified two areas that are instrumental in driving R&D in the food and drink sector:
Free-from products for allergens and diet preferences
In the food and drink industry, with allergens and nutritional focus, there has been an increase in claims for R&D tax credits to help food and drink businesses meet client and consumer demand.
Whether it’s sugar-free, fat-free, gluten-free, nut-free, dairy-free; businesses within the food sector must now accommodate dietary requirements and preferences to be relevant and competitive. RandDTax recently helped a company that wanted to replicate exiting products using gluten-free ingredients. They were able to claim tax relief on the time and money spent developing the free-from product.
Advances in diagnosing dietary intolerances and trends in life choices such as veganism or a low-salt/low-sugar diet mean that the production of food now requires extensive research and development which is costly and time-consuming. Soft drink companies have reduced sugars & calories from their products by 18% since 2012; this comes at a cost which companies are loathed to pass on to the consumer.
Upscale in production
Many food and drink companies are having to upscale their production to accommodate different ingredients, recipes, processes and packaging, all of which need to be developed, tested and improved.
We recently worked with a processing company that wanted to automate production because the staff were manually sorting and grading products. They invested in software to control the new, robotic machinery for which they were able to claim tax relief.
There are anticipated advances that will upscale production in brewing and distilling which will be eligible for tax relief such as new bottling or brewing equipment, improved hopping techniques, improved yeast strains or fermentation processes, new or improved can and bottle designs, improved keg filling techniques, water recycling or waste management.
What else can you claim R&D tax relief for in the food and drink industry?
Here are some other examples where claims can be made:
- Specific nutritional requirements such as calorie, sugar or salt reduction, or adding nutritional items such as fibre, protein and vitamins
- Improvements to shelf life, technical processes and efficiencies
- Technological advance to allow a reduction in cost or price
- Packaging where the type and design of the packaging impacts on the product, or there are significant challenges in how to package certain products
- New ingredients such as additives and flavourings and research into how to incorporate them
- Living food and drinks dependent on growing bacteria such as beer, wine and cheese, including where the product is still developing and maturing while on the shelves.
If you’re in the food and drink sector and would like to know if you could be claiming, get in touch for a free consultation.