At the heart of R&D for tax purposes, development needs to satisfy two core tests:
R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology, for example:
The art of agriculture has been handed down through the ages and it is now beginning to embrace fully the opportunities of technology and how it can improve the sector for all involved.
To find out more about the investment trends in AgriTech, read the GovGrant report here.
There are five broad categories which can classify Agricultural R&D claims; staff costs, subcontractors, externally provided works (EPWs), consumables and heat, light and power. We’ve included more detail on each of these and how it’s included in your claim below.
The majority of most R&D tax relief claims are based around staff costs. This includes people directly involved with the activity and others who are indirectly involved.
An example of direct costs would be a specific solutions architect – they tend to be defined, technical roles who are the doers of the project. A common misconception is they have to be scientists and academics, this is incorrect. If they are a competent professional whose expertise is part of the R&D effort, then they should be included.
Indirect staff are people who are also involved in supporting the R&D project such as management, procurement, control functions, where they help enable the R&D to happen and also are part of the management of the process. These costs are usually overlooked and can be a big impact on the claim.
Where you may not have the expertise in house, you may rely on a third party to help with part of the R&D process. These claims are qualifying expenses for the R&D tax relief scheme.
Like subcontractors, you may not have directly employed staff but want to have resource for a particular role who act in the same way as employees – i.e. under your care custody and control. These costs form part of the claim.
Any items that are used only for R&D and have no use once the project is completed so consumed by the project is also qualifying expenditure.
When you know how much R&D you are doing, you can then attribute a proportion of your heat, light, power & water to the R&D tax relief claim.
Our client wanted to find a way to limit the spread of infection in the milking process and at the same time speed up the end to end process.
From amending products in the market, they continued to test small changes in the mechanisms until they found a way that gave them what they wanted. This process took just over 18 months and the costs associated were picked up and a successful R&D claim made.
Our client processed tonnes of seeds every year. They wanted to . They worked on cleaning the kernels more effectively on the production line.
They set up a test belt where they kept trying different speeds, different suppliers, cleaning equipment – all the variables that they needed to operate the line. Through this ongoing process they continue to refine their product to create efficiency in the process and increased quality output. For three consecutive years, this client has made a claim and continues to benefit from the R&D tax relief scheme.