R&D Tax Credits for the Food and Drink sector

18th June 2019

New product development

As consumers we drive huge demand for new or improved food and drink products.  A vast number of new products are developed by the Food and Drink industry each year based on latest trends in the media, or as a response to increasing demand or ethical concerns. For example this might include products which are:

•    Free-from
•    High protein
•    Vegan
•    Reduced sugar, fat or salt
•    Palm Oil free

Even with our favourite established brands and products, huge amounts of work go on in the background to meet new regulation (such as the sugar tax) or to respond to commercial factors (such as changes in supply chain, or to improve shelf-life).

In relation to product development, then the development of new recipes or formulations to incorporate these trends or requirements could represent R&D.  To secure R&D tax relief, a company must be engaged in qualifying activities.  Broadly, these are activities which seek to achieve an advance in science or technology.  

New product development is likely to be qualified as R&D where there is real science in the process.  It is not just cookery.  This is production at scale, and so there is likely to be a risk that the outcome sought is uncertain, until the chemical and biological reactions which are required in production are understood and can be managed.  Often changing just one ingredient in a recipe can change the properties of the combined mixture and how this might react in subsequent stages of production (such as proving, fermentation, baking, freezing etc).   With many significant variables present at the outset, developing a recipe and (large scale) production process to achieve a consistent end product is likely carry many of the hallmarks of R&D.

Key to note, however, is that whilst it may be part of the new product development journey, initial market research as to the viability or appeal of a potential new would not be qualifying R&D.  However, developing a new product or formulation to support a marketing claim (ie now with 50% less fat) could be R&D.

Production

Production at scale can require the resolution of technological uncertainties where quality and consistency of the final product will be critical. Advances might have required technological uncertainties to be resolved to achieve;

•    Scaling up production to an increased volume output;
•    New processing methods to optimise how the potential of new equipment is harnessed or integrated into the production line (where this goes beyond that documented by the supplier or existing user community); 
•    Varying or managing inputs to achieve greater consistency, for instance the ambient temperature / humidity on the production floor, or the temperature or stage at which certain ingredients are introduced in production;
•    Introducing or adapting processes to improve sustainability, achieve reductions in waste/energy use or reuse ingredients/offcuts; or
•    The ability to cope with ingredient variability or other supply chain changes. 

Packaging

Beyond the product itself, then Food and Drink companies may very well be carrying out R&D in other areas of their business too.  The development of packaging bespoke to a given product, or which helps extend shelf life, could also attract R&D tax relief.

Systems and infrastructure

Work on a company’s IT systems could also qualify for R&D tax relief.  Has there been investment in systems used to manage the production processes or orders to suppliers or from customers, for instance?

How we can help

We have a proven track record of supporting our clients with Food and Drink sector specific R&D claims.  We would welcome the opportunity to discuss innovation and investment in your business and can help you assess the potential benefits which might be available to you under the R&D Tax Credit regime. Talk to our R&D team today.
 

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