The sweet side of R&D tax relief claims – How tax rules pave the way for innovation

While the Autumn Budget may not have had major reforms to R&D tax relief claims lined up that some may have hoped for, that is not to say it did not set the tone for the coming years.

Beyond the establishment of new investments in R&D across the country, there are some changes to tax considerations that could have piqued the interest of innovators.

If you want to continue to support innovative clients, it is best to understand the advances that might be being sought right now.

What innovations might the Autumn Budget inspire?

One of the headline-grabbing announcements from the Autumn Budget was the change to the sugar tax that would see a lowered threshold for the amount of sugar content that can be in products before the tax kicks in.

While on the surface that could seem like a superficial change, it does have a profound impact on an entire sector that is often far too overlooked when it comes to R&D tax relief claims.

Food and beverage companies are set to face challenges with pricing unless they can figure out a way to reduce the sugar content without changing the taste and texture of the products.

At the same time, other companies may be seeing an opportunity to innovate and introduce more foods and drinks for the health-conscious consumer.

While work done to affect taste is not necessarily guaranteed to be considered eligible for R&D tax relief claims if it simply involves modifying recipes, it is worth noting that sugar also serves as a preservative.

Work done to extend the shelf life of products through innovative purification, sterilisation, or pasteurisation processes will likely involve some novel developments.

These processes can destroy taste and health benefits if used incorrectly and this will result in a product that cannot be sold.

How can accountants support innovation in unlikely sectors?

It is worth noting that not every sector is viewed as equal by HMRC.

There are some sectors that are known for being on the cutting edge of science and technology, while innovations in other sectors can be overlooked.

However, if accountants want to support the work their innovative clients do, it is best that they see the signs early and determine where R&D could be taking place.

Changes to legislation and tax guidelines are not exclusive to the food and beverage sector, but it serves as a perfect example of the interconnection between R&D and the wider economic climate.

If you want to understand more about the conditions that could result in an uptick in R&D, then speaking to an R&D tax consultant could be helpful.

We work to take a holistic view of the current R&D climate to better understand the work that innovative businesses are doing, even when it may be overlooked.

If you do have an innovative client operating in a niche sector, we can help you craft a strong technical narrative.

This helps HMRC understand the validity of the R&D tax relief claim, so they do not dismiss it outright based on its origin.

Should any valid R&D tax relief claim be subject to an enquiry, we will defend the claim for the full amount of qualifying relief.

For expert guidance that won’t leave a bitter taste in your mouth, speak to our team today!

Adam Bointon