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Are You Missing Out on R&D Tax Credits?

Date: 18/09/2014 | Corporate

Despite being one of Scotland’s more traditional industry sectors, farming and agriculture is one that continues to innovate in many areas.

Research and development (R&D) is a key area of focus for many UK farmers and agricultural businesses, embracing a wide spectrum of activities, including:

  • the development of new crop strains or animal cross breeding to improve the nutritional value of food;   
  • the introduction of better and safer fertilisers, biocides and biological pest control;
  • advances in animal husbandry techniques, methods of livestock production and livestock feed;
  • improvements to waste handling processes;
  • developments in packaging technology;
  • the utilisation of  new technologies to increase efficiency and/or cut costs of existing processes;

These examples highlight some of the on-going innovation within UK farming and agriculture, but very few businesses within the sector are capitalising on the tax benefits of their R&D efforts. HMRC’s latest analysis shows that the combined agriculture, forestry and fishing sector accounted for just 70 out of the 15,865 R&D tax credit claims submitted in 2012/13.  This suggests that a large number of innovative farming and agriculture businesses are missing out.  Could you be one of them?

The R&D tax credit scheme is designed to reward and support businesses which are committed to technical and process innovation across all market sectors.  This is not about employing staff in white-coats but rather recognising the innovation that many farming businesses across Scotland deliver day-in and day-out.   If you are part of a registered company engaged in making improvements to a product or service through technological advance, using qualified staff and face a degree of uncertainty as to the final outcome of this work, then you’re likely to be eligible for R&D tax credits.

Administered by HMRC, the R&D tax credit scheme enables those companies that meet the application criteria to realise a £2.25 reduction in its taxable profits on every £1 spend on innovation-related activity. 

Small and medium sized companies in a loss making position have the option of electing instead to receive a ‘tax credit’ or cash sum from HMRC which is payable immediately.

Either way, by paying less corporation tax or receiving a ‘tax credit’ you can make an immediate improvement in your company’s cash flow position offering stability, security and the opportunity to fund future investment and business growth.

Completing an R&D tax credit application can be a complex process, however, requiring time, expertise and commitment.  While this should not deter companies from making claims, it does mean that they should ensure that they have the proper level of supporting evidence in place, both on the financial and the scientific aspects of their claim.

The team at Davidson Chalmers LLP includes experienced advisers who understand how the R&D tax credit scheme works and can explain how it could be of benefit to your business. If you would like any more information about any of the issues listed and the impact that these may have on your business, please contact Craig Stirling on 0131 625 9191 or email craig.stirling@davidsonchalmers.com

The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.

Written by

CRAIG STIRLING | Davidson Chalmers Stewart
Craig Stirling

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