Do funding opportunities for food manufacturers include development tax credit?
31 Oct 17
We take a look at why research and development tax credit is one of the easier funding opportunities for food manufacturers that are looking to maximise their investment in new product development.
In the current economic climate with rising costs and tight margins impacting on the food industry, funding for new product development can be hard to find so it’s certainly worth checking whether research and development (R&D) tax credit provides a funding opportunity for you, assuming you have not yet done so.
You should be able to benefit if you are investing time and resources in developing:
- improved methods for food production or food packaging e.g to extend shelf life
- new or improved food recipes or products involving experimentation and testing
- bespoke manufacturing processes
- experimental growing or manufacturing techniques.
How do you claim and what does it cost?
It is relatively easy to access the funding as claims are done as part of your corporation tax return (using the R&D tax credit sections on corporation tax forms).
The best way to get started is to speak to a specialist as they will help you shortcut the process of checking that you qualify. This should cost you nothing. It’s just an initial exploratory conversation that can easily be done over the phone.
The next step is to more fully scope out your claim – again this should cost you nothing as until this has been done you don’t know for sure what the financial benefit is going to be. It’s normally done in a face to face meeting where you can seek information on what activities and costs can be counted and how much your claims will be worth. This will help you decide whether to claim.
Once you have decided you want to go ahead, the third step is to claim. This involves writing a summary Technical Justification document saying what you have done and why it qualifies. You also need to do a Cost Breakdown to identify your eligible expenditure - check what costs you can claim.
The final step is to instruct your own corporation tax accountant to include the costs and technical justification in your corporation tax return.
You can make R&D tax credit claims for up to two past years by asking your accountant to amend any tax returns that have already been filed. This can provide a substantial ‘windfall’ as you will get a repayment of overpaid tax, or if you made a loss you can get a cash payment instead of a tax reductions.
If you hire a specialist to help you, most (including us) will base their fees on a percentage of what you get back, so you face little risk in investigating and putting together your R&D tax credit claim.
How long does it take?
The good news is the Government has a target to process R&D tax credit claims within 28 days, so it usually takes less than a month from when your accountant makes the tax return to a cheque arriving.
What is the benefit?
The cash benefit can be worth up to a third of your relevant development costs. The government say the average benefit for smaller companies (Small and Medium Enterprises) is around £45K but it can be much larger – running into hundreds of thousand of pound or even above £1m for companies that are investing large amounts in R&D.
My experience is that making R&D tax credit claims really is one of the easier funding opportunities for food manufacturers, wanting to subsidise the cost of investment in new product or manufactuiring process developments – to get your claim started contact us.
Are you ready to find out if you qualify or how much your R&D claims could be worth?