How can R&D tax reliefs help the UK agricultural sector?

23rd Aug 2019
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If your client has a company based around agriculture, fishing or forestry they may be missing out on an average of around £45,000 in R&D Tax Credits; a lot of cash in anyone’s pocket

What are R&D Tax Credits?

If a business carries out any activities around research and development then it may qualify for R&D Tax Credits to reduce its Corporation Tax bill or increase its taxable losses. Loss making companies can take advantage too, with the ability to ‘cash-in’ or ‘surrender’ their losses with HMRC.

What sectors are eligible and what can be claimed for?

This isn’t just about laboratories and pharmaceuticals - R&D Tax Credits can be applied to pretty much any company in any sector where innovative projects have taken place. All a company needs to do is demonstrate to HMRC that the work it has carried out is truly innovative and aims to solve a specific scientific or technological problem.

Costs that can be claimed for under R&D Tax Credits are very broad, with everything covered from money spent on salaries and tools to materials and testing. Independent research and prototype costs could also be eligible for R&D relief, however Capital expenditure will not qualify.

For SMEs, the rate of R&D tax relief can be as high as 230%, while RDEC (the research and development expenditure credit) for larger companies is worth 12% of eligible R&D expenditure.

Looking for specific numbers? Try out our Tax Cloud calculator for accountants for accurate figures fast.

Where does the agricultural sector fit into this?

Companies conducting their business in the agricultural sector are sadly some of the most likely to be missing out on a serious amount of R&D tax relief which could be invested into future projects. Recent figures show that the whole sector only claims around £5m, representing only 0.4% of the total amount claimed. By comparison, the Information and Communication sector had an average claim of £65,199 (27.73% total claims submitted) whilst manufacturing companies made an average claim of £48,823 (26% total claims submitted). Perhaps unsurprisingly, Scientific and Technical companies have an average claim of £70,010 (19.41% total claims submitted).

But it’s not all bad news…

According to Farming news website Farming UK, an upward trend in R&D Tax Credit claims from within the agricultural sector is starting to take place, with an increase of nearly 30% in the number of claims since 2015. So, whilst it’s all moving in the right direction, there are still many agricultural businesses that are not currently benefiting from the R&D Tax Credits they are entitled to.

Why aren’t companies claiming R&D Tax Credits?

In broad terms, we’ve come across three main reasons why companies in the agriculture, fishing and forestry sectors are not claiming their R&D tax credits:

  • They don’t realise the scheme exists

This is a large problem across a lot of sectors, particularly with SMEs. HMRC have recently started to pick up on this and there are plans to publicise the scheme more.

  • There’s an assumption that it only applies to science and technology companies

Not true; R&D Tax Credits are open to all industries. It’s simply a case of understanding where a company’s innovations meet with the R&D Tax Credit criteria.

  • The application process is long and complicated

It’s true that the application process for R&D Tax Credits isn’t the easiest in the world. Not only do companies need to identifyarge problem aclf".ericultural sector fi R&D Tax Con, togical problem.

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