R&D Tax Credits for the Food and Drink sector

8th January 2021

Whether participating in Dry-January, Veganuary or striving to fulfil New Year’s resolutions (particularly with gyms now closed), many consumers will be very focused on what they eat and drink.  

They will find no shortage of products specifically targeted to their needs. 

It is consumer demand which drives food and drink businesses to respond and develop new products, which aim to achieve real strides forward in one or a number of key areas, such as:

  • Improving the nutritional benefits of the food and drink we consume, achieving reductions in salt, sugar, fat, particular allergens or which might be specifically tailored to particular weight loss/healthy eating programmes (high in protein, for example),
  • alcohol free alternatives,
  • addressing ethical or environmental concerns, like:
    • sustainability, food miles or origin (for instance, reducing or eliminating palm oil to help preserve rain forest habitat)
    • vegan ranges
    • food waste, or
  • tackling the big industry issue of plastic packaging.

Developing new products requires investment and carries real risk.  

The R&D Tax Credit regime can help mitigate some of that risk with additional tax relief or a repayable cash credit available to companies carrying out qualifying R&D.

R&D activities

Broadly, qualifying R&D activities are those which seek to achieve an advance in science or technology.  

In relation to food and drink products, the development of new recipes or formulations to respond to consumer trends may well represent R&D.  

There is often real science in the process of innovating and developing new food and drink products. It really is not just cookery.

There will be a number of steps to developing a new product, from the development kitchen, to test runs of the scaled-up manufacturing process.  

There will be uncertainties and risks to overcome in relation to the chemical, physical and micro-biological properties of the product.  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).   

Taste, appearance and fulfilling the brief in terms of USP (nutritional benefits etc) will be important to the consumer, but the product also has to meet often competing requirements in relation to shelf life, surviving transportation, compliance with regulation/food standards, and still come in at a price point which leaves sufficient margin to be viable.

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.

Further information

Check out our Knowledge Hubs for:

Covid transition hub

Check out our Business after COVID-19: Transition Knowledge Hub for more guidance and advice on managing the pandemic.

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