Firms losing research and development cash
Food processors could miss hundreds of thousands of pounds worth of tax credits for research and development (R&D) costs following imminent regulatory changes, according to financial advisor KPMG.
Changes to taxation rules taking effect after March 31 dramatically cut the time limit for R&D tax relief. Companies could previously make such claims for costs incurred up to six years previously. From April, they can only go back two years to recoup this money. All claims relating to costs more than two years old must be made before that date or manufacturers will lose out.
Small to medium-sized businesses are eligible for 50% tax relief on R&D activities. Larger outfits can get 25% relief, or £300,000 on costs of £5M.
The amount reclaimed could in some cases stretch into hundreds of thousands of pounds, said Gavin Bates, senior manager in KPMG’s R&D team. “It’s not uncommon for claims we’ve worked on to produce benefits of several million pounds, although I haven’t seen a UK food or beverage firm that’s claimed more than £1M yet.”
Manufacturers could also lose out because they were putting off making claims or because they did not realise how much of their costs qualified for R&D tax relief, he said. Many thought eligible R&D activities only took place in a laboratory. “It could be anything from incorporating additives to modifying existing food processes. Quite often people won’t appreciate there’s a tax subsidy for what they do.
“A significant proportion of those who suspect they are eligible haven’t got round to claims and a greater proportion don’t even know they qualify. In my view, less than half of the companies eligible to claim are claiming properly.”
Bates said reformulating a product was one classic example of something that could qualify. Others included improving the use of equipment beyond established norms or experimentation to improve productivity. He cautioned that R&D as defined by HM Revenue & Customs was not restricted to companies’ R&D departments.
