You may already know this, but the Agri-Food industry is one of the most research and development (R&D) intensive sectors in the UK and Ireland. This is being driven by consumer and media preferences towards healthier diets and more sustainable living, and has resulted in an unprecedented level of activity and innovation in the industry. Some key examples of R&D include:
- ‘Green’ Growing – Government regulations, along with consumer preference, are causing a shift towards greener growing practices. With incremental scale-back of artificial fertilisers, growers need to identify suitable natural replacements – a process which is far from straightforward. Different blends of natural ingredients can provide variable nutrient and essential element content in fertiliser. Identifying the optimal mix of natural ingredients to produce a suitable growth media in any given situation is a significant example of R&D.
- Variety Trials – Agriculture is equal parts science and art, with lots of variables (climate, soil chemistry / composition, disease etc) influencing produce. This makes it one of the most challenging areas in which to carry out R&D. It is not always obvious which variety of crops, animals, flowers or plants will thrive and which will not, as much more than just variety influences prosperity. Many agricultural businesses are on the lookout for new opportunities, and as such, will experiment with new varieties in an attempt to increase yield and quality of produce.
- ‘Free-From’ Food – An increasing prevalence of sustainable diets and dietary restrictions due to allergies has caused the free-from market to explode in size. With dairy-free, gluten-free, nut-free and palm oil-free products (to name a few) increasing in popularity, the race is on to find allergen-free and sustainable alternatives. This isn’t an easy process and requires trials of many different substitute ingredients before a viable product can be achieved.
- Improved Shelf Life – In 2018, around 9.5 million tonnes of food was discarded. Not only is this a waste of time and money, but excess greenhouse gases created in the production of this surplus food could have been avoided. Improvements in shelf life of food products is an obvious solution to this issue, but one that is not simple to achieve. Reformulating existing recipes, adding new preservatives or novel manufacturing/cooking techniques are all examples of innovative R&D.
- Application Rate Trials – Spraying fertiliser, herbicide, fungicide, pesticide etc can be more tricky than it seems. How do you know whether too much or too little is being applied to crops? Too much and you risk over-nutrification and contamination of waterways. Too little and growth is inadequate. Finding the ideal application rate of these additives is a prime example of R&D.
If your agri-food business is involved in any of these activities, you may qualify for R&D tax credits – which can generate significant tax benefits.
Currently, for every £1 of qualifying R&D expenditure, a small to medium sized company (SME) in Northern Ireland and the rest of the UK can save 24.7p of corporation tax. Or if it does not have a corporation tax liability, it can cash losses in and receive a cash payment from HMRC at a rate of 14.5%. Large companies in the UK can also claim R&D tax credits, as can companies registered in the Republic of Ireland.
You can also potentially benefit from corporation tax savings if you have a patented invention, under Patent Box legislation in the UK. There is also the Knowledge Development Box legislation in the ROI.
The benefits are there to be claimed, although the rules relating to these tax incentives are complex and require specialist advice. This is where we can help you.
If you would like to know more about R&D Tax Credits, please get in touch to arrange a no-obligation discussion.