Tax Credits for the Food and Drink sector

The need to develop new ideas within the Food and Drink sector can be triggered by a wide variety of reasons, including responding to the demands of consumers or economic demands (cost of living) and supply chain interruption and regulations, and the list is endless…

Food and beverage companies react by developing new products and services that seek to take real steps forward in certain areas. These could include:

• Enhancing nutritional benefits
  • making reductions in salt, sugar, and fats;
  • Free of gluten or other allergens or
  • specifically designed to fit into specific diet plans that promote healthy eating (high in protein or fortified with vitamins, for instance).
• Alcohol-free alternatives that do not require alcohol,
• Extend shelf life
• Addressing environmental or sustainability concerns such as:
  • substituting essential ingredients (for instance, for example, removing palm oil to preserve the rainforest habitat)
  • Vegan or organic products
  • food garbage, food waste, or
• The big issue facing the industry is with plastic containers.

R&D Tax credits for innovation

The development of new products is a major investment and comes with significant risk. The R&D Tax Credit program is a useful mechanism that makes use of the tax system for corporations to reduce the risks and investments associated with the development of new products.

For some businesses, the result from their R&D claim may be a cash credit that can be repaid.

In general, to be eligible for R&D Tax Credits, a project has to strive to make the advancement of science or technology as well as the activities that contribute to the achievement of this goal and address scientific or technological uncertainties.

When it comes to products for food and drinks, developing new recipes or formulas could be a sign of R&D. There are usually scientifically-based methods of generating new ideas and creating drinks and food products.

In the process of combining and formulating ingredients, there are issues to consider regarding how they react and what the end result will be in terms of the physical, chemical, and microbiological characteristics of the product.

Often, just changing one component in recipes could modify the characteristics of the mix and the way it will alter the outcome in subsequent phases during production (such as baking, proving, or freezing).

Additional uncertainties could arise during the process of manufacturing due to the scale of production, creating machinery, and defining the procedures to ensure an identical end product.

The taste, appearance, and satisfaction of the requirement in terms of the USP of the product (nutritional advantages, sustainability, etc.) are crucial to consumers. However, the product must meet a variety of competing requirements regarding the shelf life, transport, and food safety regulations and come in at a price that allows for a sufficient margin to remain sustainable.

The R&D Tax Credit landscaping is changing. The relief rates and the tax credit for repayable, together with the principal corporate tax rate, will change from April 1st, 2023. This is also the case for a few of the types of qualified expenditures that are eligible for tax credit.

Beginning on August 1, 2023, HMRC will require specific information to be provided for a validating claim. HMRC will also increase their surveillance to stop fraudulent claims and errors.

It has never been more vital to work with the best advisor.

Understanding the potential impact of future changes is essential and, more importantly, to ensure the claim you submit is legal.

Bishop Fleming has a track experience in supporting clients with our clients with and Drink sector-specific R&D claims. Being a business controlled by the ICAEW, Our method of conducting R&D work must be in line with our PCRT (Professional Conduct with regard to Tax).