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R&D

New receipes?

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I've always been under the (possibly misguided) impression that R&D claims were possible on, say, brewers inventing new tastes / receipes. admittedly this has come from marketing from R&D 'specialists'. 
 

One of my clients received a letter a few weeks ago politely reminding them that R&D claims must be for scientific or technological advancement. 
 

Should I take it from this that claims for receipes are invalid? What are your thoughts? Have you ever done any?

 

 Thanks 

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boxfile
By spilly
10th Apr 2021 11:06

I think Heston Blumenthal would say that his recipes are very science-based; not sure that could be applied to all recipes though.

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By Hugo Fair
10th Apr 2021 12:32

You don't say who sent the letter to your client?

"Research and Development (R&D) reliefs support companies that work on innovative projects in science and technology" ... so, as spilly says, you may have your work cut out showing this overarching criteria is met.
Many of the other criteria should be fine, but I suspect you may also trip over "Your project must aim to create an advance in the overall field, not just for your business."

Is this a theoretical ('out of interest on a Saturday') question, or do you have a client that has previously made claims on that basis? If so, were they successful?

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Replying to Hugo Fair:
ALISK
By atleastisoundknowledgable...
10th Apr 2021 14:12

Hugo Fair wrote:

You don't say who sent the letter to your client?

HMRC

Hugo Fair wrote:

Is this a theoretical ('out of interest on a Saturday') question, or do you have a client that has previously made claims on that basis? If so, were they successful?

I have a brewery client who wants to make one, which I used to think was fine (well, more like ‘specialists’ were doing it so it crept over the line/not looked at), but now I think it will be rejected. The letter makes me think that having forked out so much money over the last 12 months HMRC have decided that they will actually look at any claim to not pay tax/get a refund.

I was wondering whether anyone had made a similar claim and if so whether it had been rubber stamped or rejected.

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A Putey FACA
By Arthur Putey
10th Apr 2021 15:02

Many "craft" beers appear to be dervied from dishwater* with a bit of chocolate mixed in, I wonder if the brewers claim R&D on them.

* polite version

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Replying to Arthur Putey:
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By atleastisoundknowledgable...
10th Apr 2021 17:30

Actually, I’m quite partial to my client’s Smarties Pale Ale.

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Routemaster image
By tom123
10th Apr 2021 17:41

Had a phone call from an R&D 'specialist' on Friday.
I ascertained he was not
a) A qualified accountant (as I am)
or
b) A qualified engineer (such as we employ)
or
c) A qualified chemist (such as we employ)
or
c) A qualified lawyer.

(and I must have been feeling generous) I still seem to have ended up with a zoom meeting I will need to cancel..

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Replying to tom123:
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By Hugo Fair
10th Apr 2021 18:16

* In this context 'specialist' simply means has done one before.
* Until you sign you'll be meeting the sales/marketing people ... after then you'll be trying to get access to anyone who can actually help you.
* A reasonable model of equivalence is an Insurance Assessor (not Loss Adjustor), who will indeed know her/his way around 'the system' - but still require you (the client) to do all the hard graft (which involves not just a lot of number crunching and modelling, but the ability to write lengthy essays in business jargon that 'fit' the format expected by the claim 'handlers').

On the other hand, I do know someone who signed-up for one year (on a no success no fee basis) ... and, after year 1 success, cancelled the contract. Why? Because he'd now got the 'template' and 'processes', so could get his engineers to repeat the process each year - currently on his 7th successive successful year!

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Replying to Hugo Fair:
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By atleastisoundknowledgable...
10th Apr 2021 19:54

Hugo Fair wrote:

On the other hand, I do know someone who signed-up for one year (on a no success no fee basis) ... and, after year 1 success, cancelled the contract. Why? Because he'd now got the 'template' and 'processes', so could get his engineers to repeat the process each year - currently on his 7th successive successful year!

Smart cookie. Don’t most of them tie you in for 3 years?

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Replying to atleastisoundknowledgable...:
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By Hugo Fair
10th Apr 2021 20:09

I believe they did, but his response was (approximately) "so sue me"!
He'd retained all the paperwork (emails etc) from the initial project and said he'd be happy to show the world the lack of competence they'd demonstrated ... and the value his company had added ("so maybe I should claim a %age of all your future business")!

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Replying to Hugo Fair:
Routemaster image
By tom123
10th Apr 2021 20:08

I agree, and here's the thing - I currently write all the reports, and tabulate all the timesheets data.

I interview the department heads about what they have done, and they have input into the technical write up.

So, not really sure what an external person would add, other than sitting in on the same meetings.

We have done in house for several years now - and I admit it is one of my least favourite bits of the year.

I hate being 'sold' to as well..

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By the_drookit_dug
11th Apr 2021 19:05

For a project to be valid for R&D tax relief there must be a degree of uncertainty about the outcome of the work.

Arguably, a competent chef will have a good idea of what works and what doesn't, so the risk of the failure of the project when creating new recipes (e.g. inedible food?) is presumably low.

However, experimentation with new cooking techniques is more likely to qualify.

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Replying to the_drookit_dug:
By Duggimon
12th Apr 2021 11:12

the_drookit_dug wrote:

For a project to be valid for R&D tax relief there must be a degree of uncertainty about the outcome of the work.

Arguably, a competent chef will have a good idea of what works and what doesn't, so the risk of the failure of the project when creating new recipes (e.g. inedible food?) is presumably low.

However, experimentation with new cooking techniques is more likely to qualify.

Low risk is still risk and still a degree of uncertainty. I would think work on new recipes qualifies completely for R&D credits.

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Replying to Duggimon:
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By atleastisoundknowledgable...
12th Apr 2021 11:35

Duggimon wrote:

<

Low risk is still risk and still a degree of uncertainty. I would think work on new recipes qualifies completely for R&D credits.

But is it a 'Scientific or Technological advance'? That's the 230% question, which I'm (unfortunately) leaning towards 'no'.

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Replying to atleastisoundknowledgable...:
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By the_drookit_dug
12th Apr 2021 11:53

I agree.

Your point regarding scientific or technological advance is spot on. If they are using existing cooking techniques, there's no advance. If they are experimenting with new methods of cooking, then it's potentially R&D.

An analogy with printers may be useful - printing new designs is not R&D, but creating new printing techniques likely is.

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