A survey conducted by Censuswide on behalf of tax relief specialist Catax found that those that do know about it believe wrongly that it is restricted to specialist tech, drug and science companies.
To qualify for research and development (R&D) tax relief, a business needs to demonstrate that it is breaking new ground in a given area and that the answer it is seeking is not readily available in the market.
“For the most part this relief is going to be restricted to companies that are doing fairly involved and innovative things with food and drink,” says Catax sales director Paul Foley. “But, with that said, this could be relevant to chain of sandwich shops right through to Michelin-starred restaurants. If you’re continually trying to push yourself to deliver better food and you come across questions you can’t simply Google, then it’s certainly worth exploring.”
The R&D does not necessarily need to be cutting edge. For example, Catex recently helped a client to get tax relief against the cost of developing a new process for removing fish skin on wild sea trout without damaging the flesh, while another received tax relief against the time and money it spent testing the ageing process of beef.
“HMRC has what’s called a Competent Professional Test, ie. are there other people out there that can do it? For this reason you’re not able to claim for everyday food development. You need to be working towards something nobody has achieved before,” continues Foley.
To secure the relief restaurants need to submit details of research projects. Costs that can be claimed back include staff payroll, external consultants and ingredients outlay. Importantly, the research does not need to be deemed a success for the business to be able to claim tax relief.
Catex says that the lack of awareness around R&D and the eligibility criteria that apply to it is costing the UK’s restaurant and pub owners millions in tax relief each year. To date, the average R&D tax benefit for restaurant clients of Catax is just over £45,000 but the company points out that larger businesses could win millions back.
“Not enough restaurant and gastropub owners are aware that a big part of what they do — experimenting with new recipes and food preparation techniques to differentiate themselves — will often be eligible for R&D tax relief,” says Catax CEO Mark Tighe. “They don’t even need to actually sell the recipes they are experimenting with or use the cooking or preparation methods they trial: what matters is the time and money spent trying to do something new and innovate. Importantly, cash can also be realised in as little as eight weeks for reinvestment in future food experimentation.”
R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum as a reimbursement from the HMRC. R&D tax relief only applies to those businesses that are liable for corporation tax.