The R&D tax relief scheme is designed to reward and incentivise innovation encouraging long-term growth and relieving the financial burden of investing in cutting-edge developments.
However, there is an assumption among some business owners that the definition of R&D is exclusive to sectors such as life sciences, engineering, technology and aerospace.
We know from experience that this perception stops the consideration of this relief in other sectors, where equally innovative work is happening.
To help you combat this assumption with your own clients, we’re going to look at some less traditionally R&D-focused sectors and identify areas, where innovation could be incentivised through R&D tax relief.
Farming and agriculture
As the world’s population grows and sustainability becomes a significant priority for all aspects of everyday life, the agriculture sector has, in many ways, brought commercial R&D into the public imagination through discussions surrounding genetically modified food or non-polluting fertilisers.
R&D is rife within the farming and agricultural sectors, including:
- Using scientific methods to improve crop yield or reduce inputs
- Developing techniques/feeds to improve animal production / welfare
- Creation and testing of new crop varieties
- Extension of farming techniques and methodologies to increase efficiency
However, we often find that business owners assume that they are not eligible for R&D tax relief for farming developments. Providing the work makes a technical or scientific advancement, this is not the case.
Such developments are often not made in isolation but as a result of the needs of an industry, which makes farming the ideal sector to take another look at how its innovators apply for R&D tax relief.
Food and drink
Agriculture is not the only point of innovation in the lifecycle of our food.
Food and drink is the UK’s largest manufacturing sector by turnover, valued at over £104 billion and is the site of a significant amount of commercial R&D.
Businesses and enterprises within the sector are investing significantly in addressing challenges such as:
- Improving the energy efficiency of making and selling food and drink
- Enhancing the taste and health benefits of common foods
- Formulating new meat-free and allergen-friendly ingredients
- Extending freshness and shelf-life of fresh and non-perishable items
All of these projects have the potential to qualify for R&D tax relief, if they meet the scheme’s qualifying criteria.
While less likely than certain farming innovations to be discounted completely for R&D tax relief, you may find that clients have substantial additional costs, which could be brought under the scope of the relief through a solid technical narrative.
Fashion and textiles
The requirement that an R&D tax claim not be in the fields of ‘arts, humanities or social sciences’ often means that sectors which have historically been classed under these terms are discounted by operators within them as ineligible for R&D tax relief.
However, innovation within the textiles industry has never been more important, addressing real-world challenges such as safety, warmth and adaptability to different climates, as well as the growing trend for clothing items and accessories built around the concept of the “Internet of Things”.
Clients doing work in this area are at significant risk of missing out on R&D tax relief when some innovations with textiles clearly meet all the criteria:
- Addressing a challenge or uncertainty within a sector, in this case a need within the market for specialist fabrics.
- Not easily overcome by another expert.
- Relating to the science of textile and material development.
This final point is often the sticking point for R&D tax relief claims for textiles firms but, as long as the project addresses a scientific issue, such as the chemical composition or tension of a fabric, a case can be made for a claim.
Approaching the client
These are just a few examples, but the possibilities span far beyond these industries into almost every avenue of the economy.
It’s important to encourage clients to think laterally when discussing R&D tax claims.
We place integrity at the core of our practice, and we know that you want to achieve that for your clients as well, but don’t be afraid to revise how you and your clients think about R&D and the sectors eligible for R&D tax relief.
The goal of R&D tax relief is to encourage R&D wherever it happens, meaning that all sectors making a meaningful scientific or technological contribution to an uncertainty within that field may well be eligible to submit a claim.
For support in identifying eligible projects and submitting R&D tax relief claims, contact randd uk and speak to a member of our expert consultancy team.
