Despite the Research and Development (R&D) corporation tax relief scheme being around for a good number of years, the food and drink manufacturing sector continues to be one of the worst culprits for not making a claim.
Recently, the government has released guidelines aimed at reducing sugar intake by 20% in the next three years. This is just one ‘trigger’ which may prompt R&D work eligible for tax relief.
Other potential eligible activities, many of which directors sometimes view as routine operations include:
- Creation of new flavour profiles/products
- Improvements to existing flavour profiles/products
- Reducing salt levels/calorie intake/preservatives within products
- Incorporating new plant and machinery into production processes
Under the R&D tax relief scheme, eligible companies can claim an additional 130% corporation tax relief on qualifying expenditure, potentially going back two financial years. This relates to expenditure incurred on wages costs and materials conducting R&D work, as well as potential software, utilities and consultancy costs.
In simple numbers, a company with £100,000 of qualifying R&D expenditure (there is no minimum or maximum limit) can reduce its annual assessable corporation tax profits by £130,000. This gives rise to a £24,700 saving at a current 19% tax rate. There is also relief available for loss-making companies by way of a repayable tax credit from HMRC.
My advice to food and drink manufactures would be to review your activities with an expert over a non-obligatory meeting to determine if you would be eligible to make a potential claim.