R&D tax credits for food and drink businesses

For food and drink businesses, there is ample opportunity for a Research and Development (R&D) tax credit claim through creating something as simple as a new recipe or a new method of preservation.

One of the major driving forces for innovation within the food and drink industry is pressure from consumers and regulators to adapt foods to make them healthier, gluten-free, vegan, organic, more sustainable etc.

When you see products stating ‘new recipe’ or ‘now with 20% less sugar’ on supermarket shelves, these can be seen as a marketing technique, however, sometimes there will be R&D claims behind it.

Examples of R&D tax credits for food and drink businesses

R&D is undertaken in the food industry with the aim to make food:

Better for freezing and defrosting
More sustainable
Healthier
Tastier (even with less sugar or salt)
Quicker to produce or to chill
Extend the shelf life without typical preservatives
With meat substitutes

R&D can be driven by either external needs, changes or legislation. For instance, qualifying activities include:

Time spent developing the process and recipe formulation
Experimenting with new state of the art equipment which needs to be adapted and have its capabilities extended to meet food needs could qualify for R&D
Development of new packaging, especially with the introduction of the plastic packaging tax
Processes which may use waste produce

Gluten free R&D example

One example of a qualifying R&D project involved developing gluten-free products. Free-from products, including gluten, are expanding rapidly in the market. It is estimated that 1% of the population has coeliac disease and developing products for coeliac’s has several technical challenges to overcome.

These include:

Staff time spent developing recipes with gluten-free ingredients that had acceptable texture and taste profile, whilst ensuring the structural integrity of the finished product is unaffected during the cooking process
Ingredients wasted and energy consumed in the development process will also qualify for the R&D incentive
Once the products technological issues have been resolved, you may wish to create a production line to scale up the manufacturing process. However, it is one thing developing a recipe on a small scale, but significant further testing is usually required to ensure it can be reproduced using mass production techniques. This includes development of a process to prevent contamination of allergens used in other products, as well as introducing robotic components and developing them for custom capabilities

Factors driving food R&D legal and regulatory changes in the food and drink sector

Legal and regulatory changes are essential and cannot be avoided. They apply when the government makes an informed decision to change a certain standard which must be met and are often high profile in the media.

The introduction of the sugar tax five years ago led to significant amounts of R&D in developing the same taste whilst reducing the level of sugar to less than 5g per 100ml to prevent the company being subject to levies of up to 24p per litre.

Other factors which may give rise to R&D activities include: