The latest statistics on Research and Development (R&D) Tax Credit published by HMRC, shows that only 0.8% of all claims made under the SME scheme were for companies operating in the Agricultural sector. However, with the average claim value being £44,776, should more companies be claiming this valuable form of tax relief?
Research and Development Tax Credit within the Agricultural industry
Despite being one of the oldest industries known to mankind, innovation within the agricultural sector still takes place daily. Companies within this sector are facing (and finding solutions) to challenges such as raising populations and climate change. Agricultural companies are also future proofing for other factors, for example, disease resistance of crops. As a result, business operating within this industry are often on the vanguard of innovation.
Eligibility for R&D tax credits focuses around the two key areas of either:
Producing new or improved products
Design and development of a product involving some degree of uncertainty for which the answers were not obvious
There’re many ways in which companies within this industry could be eligible for R&D tax credits; however, with some projects taking decades to come to fruition, it’s not only vital to what the technological uncertainties being faced are, but what would and would not contribute to the claim.
Examples of technical uncertainties within Agriculture
Biological uncertainty when developing new plant breeds
When developing a new plant variety, the breeder will need to identify parent plants that will hopefully pass on the desired traits to future plants. If all goes to plan and these traits are passed down, however, it’s often a minimum of six years before entering trails, resulting in breeders needing to predict market demand years in advance; this included predicting which resistances will be most important.
Uncertainty in predicting future diseases
Diseases and races of disease will naturally change and develop throughout the years. This means that even if a new crop variety possesses a resistance to a certain disease, new races may have developed during any stage, rendering the project unsuccessful.
Uncertainty when developing the right formula
Developing new types of soil management products requires a precise ratio of raw ingredients and materials to active ingredients; any slight alterations can directly impact on the chemical or physical properties, rendering the product unfit for purpose.
Uncertainty when scaling production
Scaling production sizes creates significant uncertainty, as when converting the original formulation, some ingredients may react differently in larger quantities.
When converting a formulation, it is often essential to conduct research and development into changing the ratios of each component. This ensures that you achieve the same desired properties in a larger quantity. This often requires a high level of trial and experimentation, based on the results of the previous formulation.
Testimonials from our Agricultural clients
Sound like familiar challenges?
Why not contact us today to discuss your business’ R&D tax relief? It only takes our team around 20 minutes to determine if you are eligible or not.