Food, Drink and R&D Tax Credits

Packaging Companies can be eligible for R&D Tax Credit Relief

The food and drink sector has basically been around forever and is a significant contributor to the British economy. According to the Food and Drink Federation, it’s the UK’s largest manufacturing sector, contributing £29bn to the economy, accounting for 20% of manufacturing in the country. In its entirety, the food and drink supply chain employs 4.3 million people and contributes £120bn, including numerous companies that undertake R&D activities on a daily basis to promote innovation in the sector. The importance of the sector is not massively surprising, as both food and drink are very useful for staying alive! 

Sector overview

There is fierce competition between long established businesses and new start-ups to increase their market share. Combined with the sector’s growing regulatory requirements and changes in consumer behaviour, such as the growing popularity of the vegetarian or vegan lifestyle and the increasing desire for meal replacements, new product development is increasing at an exponential rate. Furthermore, the growing climate crisis has forced companies to adapt other aspects of their operations, such as how their products are packaged or distributed, further driving innovation within the sector.

R&D tax credits: an underustilised opportunity in the food & drink sector 

Due to the nature of the industry, R&D tax credits can be applied to businesses throughout the supply chain. Despite this, it’s estimated that up to 65% of eligible SMEs are still not recovering their costs. Why? Because there is significant misunderstanding surrounding what HMRC actually define research and development to be.

Generally, when people think of R&D in the food and drink sector, they picture the development of meal replacements or meat alternatives. Whilst these activities obviously do qualify, eligible R&D in the industry extends much further. A few of the many examples include:

  • Improving existing products by enhancing their nutritional value, removing allergens, food dyes and preservatives, or even extending shelf life through changes to a recipe’s formula
  • Overcoming challenges to develop ‘free from’ products
  • Improving production processes by enhancing efficiency, ultimately reducing operating costs and wastage
  • Reducing the carbon footprint of products and manufacturing processes by developing sustainable packaging, or improving logistical operations through the integration of IT systems
  • Reacting to changes in regulation; ensuring a product tastes the same whilst ensuring it complies with new legislation

Consider utilising an R&D expert to receive a substantial cash benefit  for your business 

In summary, qualifying R&D is abundant throughout the sector. If you are conducting any of the activities mentioned in this article, or are doing something which is a little different and difficult to achieve, get in touch with one of our team. With over 600 applications compiled by the team and an average recovery of £70,000 per year for our clients, you know you will be in safe hands and recover everything you are entitled to.

See what other businesses in the food sector have found working with Apogee: 

The whole Apogee team has been amazing and very professional on helping us to go through the R&D process, which was very easy and straight forwards. I highly recommend their service!
Nivi
Founder

R&D in the Clothing, Textiles and Fabrics Industry

R&D Tax Credits Clothing Innovation

In recent years, the Clothing, Textiles and Fabrics industry has come under a lot of scrutiny due to the negative impact on the environment from some segments; many deem this to be the result of the ‘fast fashion’ trend, where consumers looks to purchase stylish clothing frequently and at an affordable price.

Conversely, there is another side to the industry, where customers look for garments with specific technical properties and are less concerned with volume purchases or price. Instead, they seek a high degree of functionality; waterproofing, durability, heat or cold resistance and flexibility name but a few of the functions generally sought in performance clothing. With consumer expectations rising year on year, innovation into such garments is prevalent throughout the industry.

The combination of scrutiny and evolving consumer demands has forced companies across the industry to innovate by keeping production costs to a minimum, whilst simultaneously ensuring environmentally friendly, functional products are consistently developed.

Despite this, the industry is often overlooked when it comes to R&D tax credits. Many businesses think they need to be developing the biggest thing since Gore-Tex or inventing garments comprised completely of technical fabrics to be eligible to recover their R&D costs. Although these activities obviously qualify, there is loads of less obvious stuff which also qualifies under HMRC’s intricate mechanism.

In reality, there are countless activities which entitle you to recover your costs and this is the case regardless of which part of the supply chain you are in. Whether you are a designer, pattern cutter, manufacturer or fabric mill, you may be undertaking qualifying activities. A few examples of what HMRC would consider R&D include:

  • Developing new materials, fabrics and textiles to achieve specific properties; for example, high degrees of temperature resistance or flexibility
  • Adapting existing materials or fabrics for a new purpose
  • Integrating existing materials and components (like zips) to create a new, functional garment
  • Developing new production processes to improve your output, or reduce waste and carbon footprint of your operations
  • Implementing software systems to improve your back office operations by reducing human input through automation
  • Trialing new combinations of materials

Even if these activities are being carried out overseas, as is often the case in the industry, providing the costs are incurred by a UK Limited company, they are eligible. Unfortunately this is at a slightly lower rate of recovery, which is where the mechanism can start to get a little complicated, but a good R&D consultancy would be happy to guide you through these intricacies.

If you are in the clothing, textiles and fabrics industry, hopefully this post has helped you realise there is a good chance some aspect of your business activities will qualify you to recover costs through the R&D scheme. If you’re wondering if you’re eligible, feel free to contact either myself or one of my colleagues. Between us we have submitted numerous applications for the sector, with exclusively 5* rated reviews from our clients, so you know you’ll be in safe hands