THE AGRICULTURE SECTOR
Agriculture and farming is becoming increasingly sophisticated and the demand for sustainability, diversification and profitability in this sector has created many opportunities for innovation.
According to HMRC, a project to develop a new feed or to grow crops that have substantially increased vitamin content, produce better or more reliable yields, or are more tolerant to weather conditions and resistant to blight, are examples of projects which could qualify for research and development (R&D) tax relief.
In a typical year, around 350 agriculture businesses in the UK make a claim for R&D tax relief. But despite the prevalence of R&D in this sector, SME’s in ‘Agriculture, Forestry, Fishing’ were responsible for just 1% of all claims processed by HMRC between 2018-19. This indicates that a significant number of these businesses are not aware that they are eligible for the scheme and are not claiming it.
Businesses that spend money on developing or improving their products or services have the potential to reduce a significant portion of their corporation tax or claim cash credits, if they can show that a technical advance has been made.
Qualifying R&D activities within the agriculture sector can include, but is not limited to:
• Development of new fertilisers, pest control and weed control chemicals
• Techniques to protect from atmospheric conditions, such as silage wrap
• Engineering to test and install new machinery and components
• Adaption of existing machinery, such as process automation
• Soil management and smart irrigation techniques to maximize yield
• New processes to reduce or reuse waste, such as bio-fuels
• Creation of new feed supplements to improve livestock production
• Use of sensors, drones and satellite technology
• Vertical farming or hydroponics
R&D projects do not need to be revolutionary, but it is necessary for the company to demonstrate some level of technical uncertainty in the work undertaken to process a claim. If you’ve been involved in projects which are not straightforward and require some iterative work and testing; and the work is carried out by staff who have either training or experience in the area being advanced, then this could be classified as R&D.
R&D TAX RELIEF SCHEME OVERVIEW
The R&D tax relief scheme was introduced by the government in 2000 to reward UK businesses for investing in innovation.
Since launch, over 300,000 claims have been made and £33.3bn in tax relief has been claimed. Overall, there were 59,265 R&D tax credit claims made across the UK in the 2018-19 period.
There are two schemes available for claiming tax relief: 1. Small or Medium-sized Enterprise (SME) 2. Research and Development Expenditure Credits (RDEC)
At Easy R&D, we focus on R&D tax relief for SMEs. To find out if a company is an SME for R&D tax relief purposes we look at: • Staff headcount (less than 500) • Either turnover (€100m) or balance sheet total (less than €86m).
SMEs are offered a generous amount of tax relief through the scheme, as they can claim back up to 33p for every £1 spent on R&D.
Although data from HMRC shows that R&D tax relief claimed by SMEs is increasing, many smaller companies are still not claiming the benefits they are entitled to. This is often due to a lack of awareness about the scheme.
Easy R&D speaks to businesses every day that do not know about the R&D tax relief scheme, and they are always surprised to know they qualify for it.
Once a claim has been submitted, the tax benefit arrives in the form of a cash payment and/or a corporation tax deduction – in most cases within just four to six weeks.
QUALIFYING R&D
Some of the costs that claims can cover include:
• Staff salaries, NI, pensions and expenses
• Software downloads and subscriptions, apportioned for subsequent use
• Subcontracting costs
• Utilities such as water and power
• Materials and consumables
• Prototype development
BENEFITS OF R&D TAX RELIEF
Annual SME claims have almost doubled from 9,000 to 14,000 in the last three financial years and continue to rise. The cash injection can be hugely valuable to businesses. Recovered funds can be re-invested into further R&D, used for purchasing new machinery, materials or technologies, invested to help business growth or even used to overcome challenges when times are tough.
R&D tax relief is a reward from the government: a way of incentivising businesses to invest in innovation within the UK.
CASE STUDY: WHARTONS NURSERIES
We helped our agriculture client, Whartons Nurseries, claim a significant value of tax credits. As the UK’s largest wholesale grower of garden roses, they develop their own pesticides. We identified significant related expenditure that could be used for tax relief, from product development and testing to planning and administration.
“Easy R&D helped us realise the true extent of R&D we had been carrying
out and helped us secure a substantial tax repayment.”
Paul Wharton, Director at Whartons Nurseries.
ABOUT EASY R&D
Easy R&D is a tax consultancy specialising in claiming R&D tax relief for UK businesses.
Easy R&D works with business owners and leaders looking to claim R&D tax relief from HMRC, but what qualifies is not always straightforward. Working in partnership with clients, Easy R&D’s specialist tax consultants maximise the claim for R&D claims while minimising the time required from the business. With a single-minded focus on R&D tax relief, and a diverse team of UK-wide technical experts, Easy R&D goes the extra mile for clients so they can put more back into their business.
WE’D LOVE TO HEAR FROM YOU
We believe every small and medium-sized business in the UK deserves support to fulfil its potential, to be empowered to innovate and develop at its own pace.
If you would like to discuss your R&D claim potential, we’d love to hear from you.
Call on 0203 286 1691 or email [email protected].
www.easyrnd.co.uk
