Experts provide insight for how businesses in the agricultural sector can use R&D tax credits to begin to take advantage of their innovation.
Evidence suggests that more awareness is needed of the range of applications for R&D tax credits in agriculture in the UK.
With HMRC data revealing that the UK agriculture sector made up less than 0.5 per cent of UK R&D tax credit claims, those operating in the industry are encouraged to consider whether they might be eligible.
For those that did make a claim from the sector, the average value of a claim was nearly £52,000 in 2017-18.
What is R&D tax credit for agriculture?
In the UK companies are able to claim tax relief for their R&D activity.
The schemes, for SMEs and larger companies, are both administered by HMRC. Typically SMEs get back up to 33 per cent of the amount they’ve spent on qualifying R&D.
Large companies could get more than 10 per cent of their R&D spending refunded.
The misconception is that it is an innovation tax credit only suited to those in white lab coats and in digital sectors, though it is applicable to any business that has developed and used innovation in its process - it can even be applied to for tax savings on innovation that has failed.
According to HMRC, to get R&D relief, you need to create a new product, service or process, or change an existing product, service or process for the better.
A typical claim in the agriculture sector is likely to include:
Increased production and scalability
Technology and software
There are five broad categories which can classify Agricultural R&D claims: staff costs, subcontractors, externally provided works (EPWs), consumables and heat, light and power.
We find that companies from all sectors have the potential to claim UK R&D tax relief. For tax purposes the definition of R&D is so much broader than you may think.
We know that agricultural businesses of all kinds are now benefiting from refinement through technology.
R&D tax claims can come from process improvements, production improvement and scalability and quality control. And we see this happening in all aspects of agriculture, including:
Growing of crops
Support activities to agriculture and post-harvest crop activities
Forestry and Logging
Even when businesses are already claiming R&D tax credits, they might not have fully explored the full potential of that claim. For example, we had a client who had not considered a key project as R&D as they were collecting study data on behalf of a professional body.
In this case, day-to-day work was carried out to monitor the crops under specific trial conditions and collect data, that was time spent on R&D. Similarly with indirect personnel who were working to enable that R&D.
How much innovation is there in the agriculture sector?
We see a huge amount of innovation in the agricultural sector.
So much activity that could be considered good farming practice would qualify as R&D.
So, for instance, when a grower wants to understand why their crops are not growing well, discover novel ways to improve crop yield or ways to save money on the farm.
In looking at why pollination is low over the past few years, tracking bee populations and activity
Tracking pests and response to different pest control processes
Investigating new ways to use waste materials in a novel bioreactor as a means to reduce energy costs
Different glass and greenhouse lighting conditions
Airflow impacts within a greenhouse
How different varieties grow and respond in the same/different growth conditions
What are the triggers that could suggest that a farmer may have R&D that qualifies for tax credit claim?
If there is a moment where your crops has not grown as well as expected, then any time spent looking into why this may be the case could be qualifying R&D.
Any machinery you have tweaked on the farm to improve a particular function or purpose specific to their situation could be R&D.
Anything you have tried as a way to save money – whether it worked, or not. Either way, may be qualifying activity.
Our one and only goal is to get you the maximum benefit you deserve for innovating.
Initially we will assess the viability from a financial point of view to make sure it is worth making a claim, by reviewing your management accounts and tax computations.
We do not want to waste your time so we will give you realistic feedback from the start.
If there is a good chance of making a claim, we then arrange a meeting with each relevant department or site.
This is when our specialists drive out what is qualifying R&D. We never ask the question ‘Tell me about your R&D’?
We have a detailed conversation to understand your whole business and the projects you are undertaking.
When you meet our specialist, it will feel like you are talking to a colleague rather than your advisor.