The agricultural and horticultural sectors are continuously evolving, with many companies striving to increase efficiency, reduce wastage and improve new and existing products. This has resulted in many businesses undertaking Research and Development, often not realising that they can claim tax incentives such as R&D Tax Credits to help support their efforts on innovation. Many businesses in this sector are run as sole traders or partnerships, so it is important for these businesses to consider incorporation as a limited company, which will then make them eligible for these valuable Government tax incentives.
The latest statistics released by HMRC show a very small proportion of companies in the agriculture, forestry and fishing sector are claiming R&D Tax Credits. In the 2016-17 year, a total of 405 companies claimed tax relief amounting to £25m, suggesting an average claim value of £61,728. In the 2017-18 year, the number of claims received so far show 385 companies claiming £20m of tax relief, the average claim value being £51,948.
What type of activities qualify?
Examples of the type of projects which are likely to qualify for R&D Tax Credits within the agricultural and farming sector include;
- Development of fertilizers
- Development of new machinery and processes for soil erosion & water retention
- Adaptation to existing machinery
- Waste reduction processes
- Development of new techniques to grow crops to increase quality
- Appreciable improvement of existing processes to increase efficiency and cost effectiveness
- Automated packing systems
- Development of prop protection products to reduce disease and improve pest control
- Adaptation of various growing conditions
- Development of processes to improve product safety
- Work carried out to reduce water pollution and improve farmland biodiversity
What types of expenditure can be included?
R&D Tax Relief can be predominately claimed on revenue expenditure in the following cost categories:
‘Innovation Tax were recommended to us from another business relation and we were surprised to learn that we were eligible to claim R&D Tax Credits for our efforts in innovation and product development. Innovation Tax were very efficient, knowledgeable and thorough in their approach from the very start and we would not hesitate in recommending them to assist other business in this sector to claim these valuable tax benefits’. Marvin Haines, GS Haines & Sons Ltd