On 1 April the research and development tax relief rate increased from 225% to 230% for SMEs, and the R&D Expenditure Credit (RDEC) for large companies went up from 10% to 11%. This may not seem like much, but when you consider they could mean thousands of pounds saved for companies in the fmcg sector, it’s essential to be aware of their implications.
However, awareness of the scheme and its potential windfalls within the fmcg sector is still lower than it should be. Plus, many companies don’t realise what they do is truly ‘innovative’.
Consumer and government demands on food and drink manufacturing are constantly evolving. The drive to improve the nutritional value and transparency of what’s in food has challenged businesses of all sizes to innovate: for instance, to investigate new techniques to cut satfat, while still maintaining the food’s organoleptic properties.
Even once that has been achieved, the next challenge is identifying methods of production to support the manufacture of these products on an industrial scale, and ensuring the consumer will still be satisfied. The efforts undertaken in such work are classed as overcoming ‘scientific or technological uncertainty’ and could therefore be eligible for an R&D tax relief claim.
We have already seen companies in food and drink make significant claims. One of our clients, a large food manufacturer, was able to identify over £6m of eligible R&D expenditure within just one year’s activity, which resulted in sizeable tax relief.
The message to the fmcg industry must be act immediately. Companies who invest in understanding the complexities of R&D tax relief, and take the time to seek advice in identifying all their eligible projects, are rewarded many times over.
The benefits of the UK’s R&D tax relief scheme are clear. The savings that can be made, and the remuneration gained, have significance for a wealth of food and drink companies.
We now need a bold, long-term strategy from the government to ensure all companies across the sector are getting the relief to which they’re entitled.
Jennifer Tragner is R&D tax director at tax relief specialists Alma Consulting Group