The food and drink industry has long been a cornerstone of the UK economy. R&D tax relief can help support the industry for years to come. Without products going out to supermarkets, stores, markets and public institutions such as schools and hospitals, the people of the UK would be in a poorer place. The food and drink sector employs tens of thousands of people and will become even more important after the UK leaves the EU for good.
There is a lot of struggle in this part of the economy. With the low margins, pressure on price from consumers and potential for wastage, the food and drink industry is constantly looking to make their offering better, including –
- Changing formulas to meet customers demand for healthier food
- Meeting changes in regulation
- Looking to extend shelf life
- Using new techniques or equipment
The bad news is this takes money to achieve.
The good news is this take money to achieve.
Let’s take a look at why spending money to make your food and drink business can be a good thing for the finances of your company. The UK government is looking to support businesses across the spectrum, including the food and drink industry, who spend money to improve what they do. Details below
What Are the Government Doing?
The UK government saw over a decade ago that stimulating investment in the economy was a very good thing. Looking to successful schemes in other countries, R&D tax relief was launched with some fanfare. Unfortunately, not everybody got the memo. There are still thousands, tens of thousands of companies across the UK that haven’t even heard of R&D tax relief. Statistics suggest that those in the food and drink sector are some of the lowest claimants. If you don’t know R&D tax relief exists then how can you make a claim?
It is said that only 1% of eligible projects in the food and drink sector have been claimed. Do you know how much cash that leaves on the table? An average claim we make on behalf of our clients is over £50,000. You could have a sizeable claim sat in your business right now, waiting for the forms to be completed and the cash to wing its way to you.
How does that sound? If you’re like any of our satisfied clients than you’ll love the idea that the HMRC is ready to give money back to you. It only ever happens the other way around at the moment – you putting you hand in your pocket for the tax man. Imagine how satisfying it will feel to receive money from the tax man. Without further ado, let’s take a look at what it all means.
What Is R&D Tax Relief?
R&D tax relief is a system where the HMRC has been asked to reward companies that take some form of commercial risk with their operation. It fits in perfectly with the food and drink industry, because that is something they do constantly. Look at the bullet points above. Each of them carries a risk when you enter a project to do something better –
- Changing formulas to meet customers demand for healthier food. What if people don’t like the results? Can you come up with a suitable formula? What if the new ingredients push the price through the roof?
- Meeting changes in regulation. What if this costs an arm and a leg? Could it put you out of business? When will regulations change again?
- Looking to extend shelf life. Will it affect the taste? Do retailers care? Will it affect sales?
- Using new techniques or equipment. What other changes might need to be made? Will the new equipment just slot right in or will it need to be embedded? Will it pay for itself in the long run?
And living with all of these uncertainties every time you make a change in your food and drink business can be a stressful time – and a draw on money, resources, time and effort. Will it all be worthwhile?
But that’s the beauty of R&D tax relief. It looks at this uncertainty and the risk associated with it as something that deserves reward. Submitting an R&D tax relief claim (more on that later) should be the natural next step when a project is finished and the dust settles. The UK government wants businesses to push forward, do better as it has a knock-on effect for the economy of better quality, more jobs and ultimately higher tax receipts.
How To Submit a Claim for R&D Tax Relief
If you have been doing pretty much anything to improve your food and drink business over the last few years, then we need to talk. At Lumo, we have seen R&D tax relief claims where others have not. You might think that you have just been going along doing what you do. But the reality is that so many different things carried out by food and drink businesses are actually what the government and HMRC classify as research and development.
You can submit a claim by going on to the HMRC website and looking through all of the information that relates to this tax relief. There you will find definitions of what research and development is as far as the government is concerned, definitions of the important terms and all manner of technical detail that goes with it.
This isn’t a task for the fainthearted. We can tell you, even as tax advisers we find this stuff pretty boring. As someone who has enough on their plate running a successful food and drink business, we’re sure you have better things to do with your time.
There are two components to a successful R&D tax relief claim –
- The financial details of what you spent on an R&D project
- The explanation that shows how you overcame uncertainty and delivered an advance in science or technology
And it is terms like these that put off many people in the food and drink industry. They don’t see their work as science or technology. Again, this is a perspective issue – it depends on what you define as science or technology. That’s where you should lean on a partner who understands R&D tax credits.
What Happens Next?
Once you have all the data together you should send it to the HMRC. From there, they can look at your claim and make a decision. The HMRC will look at your claim against their criteria. Matching your explanation against four critical factors –
- Did it for an advance in science and technology?
- Did it have to overcome uncertainty?
- Have you tried to overcome this uncertainty?
- Could it have been easily worked out by a professional in the field?
Make sure your report covers all of these areas in enough detail to persuade the HMRC that you are eligible. They want to help (and actually want to pay you too) so give them the opportunity to do so. Any rumours you hear that this is a difficult process can be put to one side. If you follow the rules of the game, then you will succeed with your R&D tax relief claim.
With this in mind, you have a choice with your R&D tax relief claim of whether you carry this out yourself or to seek professional help. There are a number of reasons a professional can smooth the way for you, including –
- They know what the HMRC is looking for
- They have been there before
- An adviser can maximise your claim
- They save you time
And if you want the most from an R&D tax relief then you should look for an adviser that really knows their stuff. The good news? You’re in the right place!
How Can Lumo Help with R&D Tax Relief?
We do nothing but R&D tax relief. Every day. All day. We have been doing this for some time now, so really know our stuff. Lumo have a 100% success rate with the tax man for R&D tax relief claims – especially with the food and drink sector. We know what they are looking for and can submit a claim in the right format. Doing this correctly first time means that you don’t end up with delays and a set of questions from the HMRC. If you submit things and make it as easy as possible for the tax man, then you could end up with the money back in your business in as little as 4 to 6 weeks. This is where the report explaining the nature of your project needs to be spot on. Too much jargon and they won’t be able to assess properly. Not enough detail and they can’t make a decision. It’s like the porridge Goldilocks tastes – it has to be just right!