R&D Tax Credits for the Food and Drink sector

The necessity to innovate in the Food and Drink sector can be driven by a wide range of factors, whether responding to consumer demand, commercial/economic pressures (cost of living), supply chain interruption, regulatory requirements, the list goes on…

Food and drink businesses respond by developing new products, which aim to achieve real strides forward in key areas, which might include:

• Improving nutritional benefits;
  • achieving reductions in salt, sugar, fat;
  • free-from gluten or particular allergens; or
  • specifically tailored to healthy eating programmes (high in protein, or fortified in vitamins, for example).
• alcohol free alternatives,
• extending shelf life
• addressing sustainability or environmental concerns, like:
  • substituting key ingredients (for instance, eliminating palm oil to help preserve rain forest habitat)
  • vegan or organic ranges
  • food waste, or
• tackling the big industry issue of plastic packaging.

R&D Tax Credits for innovation

Developing new products requires investment and carries real risk.  The R&D Tax Credit regime is a valuable mechanism which uses the corporation tax system to help subsidise the risk and investment associated with innovation. 

For some companies the result of their R&D claim might be a repayable cash credit.

Broadly, to qualify for R&D Tax Credits a project needs to seek to achieve an advance in science or technology, and the activities which contribute to achieving this advance, address scientific or technological uncertainty.

In relation to food and drink products, the development of new recipes or formulations may well represent R&D.  There is often real science in the process of innovating and developing new food and drink products.

In formulating and combining ingredients, there will be uncertainties to address in relation to how these react and the final 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).   

Further uncertainties may exist in the manufacturing process related to scaling production, introducing machinery and defining the processes, to achieve a consistent end product.

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

The R&D Tax Credit landscaping is changing.  Rates of relief and the repayable tax credit, along with the main rate of corporation tax are changing from 1 April 2023, as are some of the categories of qualifying expenditure which can be claimed. 

From 1 August 2023, HMRC will require certain information to be submitted to them to validate a claim. HMRC are also increasing their scrutiny to combat fraud and error.  

As such, it has never been more important to partner with the right advisor. 

Understanding the impact of upcoming changes is key, but even more so ensuring that your claim is compliant. 

Bishop Fleming has a track record of supporting our clients with Food and Drink sector specific R&D claims.  As a firm which is regulated by the ICAEW, our approach to R&D work necessarily complies with the PCRT (Professional Conduct in Relation to Tax).

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 under the R&D Tax Credit regime. Speak to our team of experts today.

Further information

• R&D Knowledge Hub
• Food & Drink Knowledge Hub