Food waste is, for various reasons, one of the main challenges that companies in the food industry are currently facing. Many businesses in this sector are heavily investing in the development of novel solutions and the improvement of manufacturing processes to reduce wastage.
Let’s explore how R&D tax credit relief can support food companies in reducing wastage, enabling them to recover a substantial portion of the costs associated with said projects.
Why is reducing waste critical for companies in the food sector?
It shouldn’t come as a surprise that reducing manufacturing wastage is one of the priorities for businesses in the food industry. From an economic standpoint, wastage represents a huge cost for food companies.
Looking at wastage from a different angle, consumers are increasingly demanding to stop food waste to protect the environment, putting pressure on businesses. With around 9.5 million tonnes of food going to waste every year, the UK is registering an increasing level of wastage produced per year, which is contributing to the overcrowding of landfill sites and becoming a reason of concern for the country.
On the bright side, food companies are developing innovative solutions to tackle food waste and improve the efficiency of their manufacturing processes.
How are food manufacturing companies responding to waste reduction during manufacturing processes?
Developing packaging able to extend the shelf life of food products has a significant impact on food wastage. There are various factors influencing food’s freshness: air, light, temperature, microorganisms, and enzymes just to name a few. When developing packaging, companies need to consider all of these factors and come up with solutions able to minimise their impact on food. The modification of atmosphere packaging and the use of barrier packaging are some common examples of ways to extend food shelf life.
However, packaging is not the only factor when it comes to tackling food waste. The implementation of tracking systems in manufacturing processes becomes crucial for companies to cut costs and reduce the environmental impact associated with their wastage. The Internet of Things is emerging as a very effective solution to reduce waste through the monitoring of raw materials and inventory.
With the integration of The Internet of Things in internal processes, food companies can track areas like stock and receive real-time data to guide orders of ingredients and supplies, avoiding unnecessary waste. Further, this technology offers other advantages in terms of tracking environmental factors, such as humidity and temperature in warehouses, ensuring optimal conditions for food.
How can R&D help food companies reduce waste?
With over £39 billion readily available from the UK Government, R&D tax credit relief presents an enormous opportunity for companies in the food industry. However, every year many eligible companies miss the opportunity to recover their costs through the incentive due to numerous misconceptions surrounding eligibility.
If we take the development of new packaging as an example, if the company is aiming to do something new/unique with the packaging, or improve the function/performance of existing packaging, and there is an element of trial error, it’s likely to be eligible for R&D relief. Many business owners believe the incentive is designed only for projects aiming to develop new-to-the-world products or solutions, but this is not the case.
The incentive extends to all the projects striving for innovation. Even if other competitors utilise packaging solutions similar to what a business is trying to develop, this could still be eligible; if the development processes for achieving something is not of the public domain and require an investment of time and money, it’s likely that the business is doing R&D!
We’ve only scratched the surface of innovation and R&D tax credits in the food sector; should you wish to learn more, or if you have any questions, feel free to get in touch.
The latest Intergovernmental Panel on Climate Change (IPCC) report sets 1.5°C above pre-industrial levels as the limit for global warming, warning that if we fail to contain it within this limit, the effects on the planet could be irreversible.
The UK is leading the way towards Net Zero emissions and has launched a clear program that aims to achieve this target by 2050. The target is ambitious and is not going to be cheap to achieve. It’s estimated that the annual cost of the net to zero programs will cost around 0.6% of the GDP.
The economic benefit of Net Zero
The UK was the first major economy to formalise a Net Zero program; the Government is confident that this challenge will provide unprecedented economic opportunities with millions of jobs soon to be available in the country.
Further, the investment in the acceleration of renewable energy production ensures that businesses and consumers will be protected from energy price spikes caused by volatile international fossil fuel markets, reducing the average energy bill (which is good news with the current energy prices situation).
R&D at the forefront for Net Zero
The Government aim to harness R&D to reach the UK’s sustainability targets, and recently announced the largest R&D budget ever, with 39.8 billion available for 2022-2025 to drive innovation forward; an unprecedented opportunity for businesses to benefit from the incentive.
The are several plans for the decarbonisation of different sectors such as transportation, aviation, and agriculture. This opens countless opportunities for businesses working on projects such as the development of hydrogen solutions, sustainable aviation fuels or novel solutions to boost productivity and sustainability for farmers and growers (. Further, the steel industry shows high potential for R&D with the development of hydrogen-based steelmaking and the implementation of systems to retain carbon as a prime example of that.
The opportunities for businesses to benefit from the incentive go far beyond the very techy and scientific projects.
The optimisation of manufacturing processes aiming to reduce waste
The iteration of existing products aiming to improve their durability
The improvement of recyclability attributes in products
Work with Apogee and be part of the solution
The shift toward Net Zero also involves changing how we make decisions in our day-to-day life. Working with a sustainable supplier has a positive impact on the environment and helps your business achieve its sustainability goals.
Apogee is the sustainable choice for your R&D. With our commitment to sustainability, we make sure that every application we compile contributes towards the protection of our planet. By working with us, 100 trees will be planted (200 for two-year retrospective applications) in your name and part of our profit will be donated towards the protection of rainforests.
Getting ready to submit a Research and Development (R&D) Tax Credit application can be tedious. On the surface, it’s a matter of following the criteria provided by HMRC, yet many business owners are discouraged by the complexity of this process. Identifying qualifying activities and allocating a reasonable proportion of the costs incurred during an R&D project is not an easy exercise for those who are unfamiliar with the guidance.
In this article, we’ll try to prevent you from incurring six common mistakes that people make whilst putting together an R&D application.
1. Preparing without any understanding of the guidance
The Corporate Intangibles Research and Development Manual (CIRD) is extensive, with over 50 pages of jargon-heavy text that may not be thoroughly understood. Although it isn’t a requirement, reading the simplified guide to gain a better understanding of HMRC’s criteria is highly recommended to reduce the risk of including non-qualifying activities and expenditures in your application.
2. Recovering under the wrong incentive
Based on its size, a company can recover costs related to an R&D project through two different mechanisms:
The SME incentive – for small and medium businesses with fewer than 500 employees, a yearly turnover of less than €100 million, and assets below €86 million
As always, it isn’t that simple. In some instances, companies that would normally fall under the incentive designed for SMEs, could be forced to recover their costs under the RDEC one due to factors such as grant funding received for example. Each company must consider all avenues of an application to make sure they recover under the correct incentive.
3. Not keeping accurate records
R&D applications can be made up to two years after the end of an accounting period (also known as a year-end). For example, if your accounting period ended on January 30th 2020, you have until January 30th 2022 to apply.
Accurate record-keeping makes up a large portion of any R&D application, not only by providing relevant figures but by explaining to HMRC why you believe the costs associated with a project are eligible. Well maintained records are by no means a requirement, but they will help you if HMRC were to raise a query and will also help to ensure you are fully optimising your application.
4. Missing out some qualifying costs
One of the most common errors is not including all eligible costs, or even including ineligible costs instead. Misunderstanding what can and cannot be included in your application can lead to queries from HMRC or an undervalued benefit.
There are four main categories of costs that can be recovered under the SME and RDEC incentives:
We have more information about qualifying costs on pages below:
As previously stated, the R&D guidance is a lot broader than people realise. As there are multiple misconceptions around the costs that are eligible to be recovered, using an R&D expert will ensure you get these correct and are recovering costs against eligible projects. Although using an expert isn’t free, it maximises the benefit you will receive and saves you from all the heavy lifting of compiling an R&D application.
For example, if you compile an R&D application yourself and receive a £10k benefit from it, an expert could enhance the value of your benefit substantially (e.g., £30 k) making this a worthwhile decision for your business.
6. Not applying at all!
The biggest mistake companies make is to not be rewarded for their R&D projects at all! It’s estimated that between 65-85% of UK businesses still aren’t recovering under the R&D incentives. As the Government announced a £39.8 billion R&D budget for 2022-2025, now more than ever poses a great opportunity for businesses to be rewarded for their continuous innovation!
Considering applying for R&D tax credits?
Please don’t hesitate to contact uswe’ll be happy to help! From general guidance, to report writing, Apogee will make the application process easy and stress-free.
Software Development is the basis for many R&D Tax Credit applications; with businesses fully embracing digitalisation and emerging technologies like AI becoming more commonplace, the number of software development projects is only expected to increase. However, there are still many misconceptions regarding what types of software development activity and expenditure qualifies for the relief.
The R&D incentive is broader than many realise when it comes to the activity that qualifies; HMRC’s guidance states that there must be an advance in science and technology in the field of software development, not just in the company’s own knowledge.
But what does that actually mean? Some common examples of qualifying software development activity include;
Programming a new platform with bespoke functionality (such as an ERP, CRM or WMS)
Developing a website with unique technical functionality (such as a novel customer portal)
Enhancing an existing platform to develop new features
Integrating existing platforms that do not natively integrate in their off-the-shelf state
Programming novel toolkits or development tools
Developing cyber security toolkits and exploits
Although the criteria for qualifying software development activity are broad, not all programming is considered qualifying activity under the R&D incentive. Programming that does not advance science and technology in the sector, or carry with it a degree of technical uncertainty, does not qualify for R&D Tax Credits. Some examples of software development that would not qualify for R&D Tax Credits can be found below;
Routine programming and bug fixing in which the outcome is clear
Routine optimisation of programming
The use of software, such as WordPress, to create basic websites
Enhancements solely related to aesthetics (such as graphic design)
The development of video games is also not eligible under the R&D Tax Credit incentive. Instead, support for these developments is provided through the Video Game Tax Credits incentive. Certain costs associated with developing a video game, such as the programming of the game itself, voice acting and motion capture can be recovered through this incentive, if the game fulfils the necessary qualification criteria and passes the cultural test.
The many nuances of R&D Tax Credit applications for software development activity cannot be covered in a single article, so keep an eye out for future updates from us that will provide more detail.
As always, if you’re ever unsure whether an activity, or expenditure, is eligible for R&D Tax Credits relief, or if you just want to know more, get in touch using the enquiry form below, or you can find the email addresses for various members of our team on the team page.
Do you know what it really means to be Carbon Neutral?
The term is often thrown back and forth, but how do we actively achieve full carbon neutrality? We recently collaborated with One Tribe, one of our climate action partners, to tell you the ins and outs, and how we are using rainforest projects to become carbon neutral…
‘Carbon Neutral’ – Explained
First, you’ll need a clear understanding of what carbon neutral means. Carbon neutrality refers to the balance between carbon emissions and carbon sequestration (carbon sequestration happens when carbon is removed from the atmosphere and stored).
Put simply, any carbon dioxide a company releases into the atmosphere, from activities such as energy production, transportation, and manufacturing, would need to be removed for the business to be considered as “carbon neutral”.
So, what exactly needs to change at Apogee for our business to become carbon neutral?
Since October 2020 (when Apogee was founded), our underlying pillars have been crystal clear: people, planet, profit. Our goal is to continuously give back to the planet rather than taking away from it, whilst using our profits to look after our people and create a greener future.
Why is carbon important to understand?
Carbon isn’t all bad…
It makes up basic building blocks of all organic life: from plants and animals to soil and human beings. A great deal of our planet’s carbon is found in rocks and sediment. The excess can be found stored inside living and dead organisms, all of which are known as carbon “sinks”.
While carbon is naturally part of our atmosphere, the main issue is that too much of it is toxic to both us and our planet. In 2019, carbon dioxide accounted for around 80% of all greenhouse gas emissions from human activities within the United States. Natural resources (like the ocean and rainforests) can store and remove this carbon from the atmosphere before it can reach toxic levels.
Additionally, carbon stored in trees is released promptly when trees are cut down (the rate of deforestation between 2015 and 2020 was estimated at 10 million hectares per year). As a result of human activity, the amount of carbon released into the atmosphere has drastically exceeded safe levels, and the world’s natural resources continue to struggle to keep up with balancing carbon emissions as CO2 levels continue to rise.
Climate change is a global problem
To achieve carbon neutrality, we must recognise that there is a global carbon budget, aimed to limit global temperature rise to 1.5°C above pre-industrial levels. In other words, there is a limit on the amount of carbon or Green House Gases (GHG) we can emit. We can’t keep emitting large amounts of carbon into the atmosphere and simply sequester it afterwards.
The world needs to reduce average carbon emissions by two gigatonnes per year (that’s 5% of our total emissions from 2020), in order to keep global warming to, or below, 1.5°C.
The United Nation’s body for assessing the science related to climate change (the Intergovernmental Panel on Climate Change or IPCC) predicts that a 1.5°C increase in global temperatures we will see extreme heat waves, severe levels of ocean rising, and the destruction of about 70% to 90% of coral reefs.
Coral reefs, also known as the ‘rainforests of the seas’, support more species than any other marine ecosystem known. Though they make up less than 1% of the oceans floor (if spread flat), they are the home of nearly 25% of all marine species.
Ocean warming affects the ability of marine ecosystems to remove carbon dioxide from the atmosphere, not just because warmer water naturally absorbs less carbon dioxide, but also as it causes distress to marine habitats that are built for cooler water.
In short, an increase in temperatures above 1.5°C would be beyond catastrophic, for all life on Earth.
Sea levels could rise by an additional one to three feet
By 2100, the IPCC estimates that sea levels could rise by an additional one to three feet, putting millions of individuals living along coastlines at risk and making many small island nations uninhabitable.
Higher global temperatures could also lead to drought, disrupting agriculture and exacerbating hunger and poverty. Limiting the rise in temperatures to the 1.5°C threshold is still possible, but only through swift and drastic global action.
Carbon offsetting helps make up for when emissions can’t easily be reduced
We are in no position to remove CO2 and other GHG emissions from all of our activities at this moment in time, particularly when talking about emissions that are related to our activities, but which we have limited control over. These are known as “Scope 3” emissions.
Scope 1,2 and 3 emissions are the categories provide a framework for carbon measurement, for its reduction and offsetting. They group emissions related to an organisation into three categories, or “scopes”, and the level of control the organisation has over emissions varies between each scope.
Scope 1 emissions are the emissions resulting directly from company activities, like the production of goods and from company vehicles. Scope 2 emissions are emissions resulting from power costs; electricity use, for example. Since these emissions are not occurring on-site, they are indirect emissions, but are still in control of an organisation. Scope 3 emissions are also indirect emissions, but organisations have limited control over them. For example, emissions from employee commute and supply chain activities are considered Scope 3.
To achieve the goal for a greener, safer, and sustainable earth, we can use Carbon Offsetting initiatives to compensate for the Green House Gasses that are emitted either directly or indirectly into the earth’s atmosphere. One Tribe help companies to specifically reduce their Scope 3 emissions.
How is Apogee tackling climate action?
Tackling climate change isn’t something that happens overnight. We’re continuously taking steps to ensure our internal processes and operations do not negatively impact the planet.
Using our partner’s SustainIt – The Good Data People’s Insights Calculator, we’re able to calculate how our actions impact the planet. On a weekly basis, we track our waste and travel. By monitoring these aspects of our business and taking action to reduce waste, we’re helping to reduce greenhouse gas emissions, combat the plastic crisis and aiding in the fight against climate change.
How carbon offsetting works
Carbon offset projects range from protecting oceans, forests, and vulnerable communities to investments in sustainable agriculture and green power technology. This has made it easier than ever before to find a cause that aligns with individual or corporate values.
Legitimate programs will provide a transparent, measurable reduction in permanent emissions that would not have happened otherwise. Many can be continually monitored and are enforceable with laws to support emissions reduction.
If you’re asking what it means to be carbon neutral, then the answer is to take responsibility for man-made carbon emissions, take action to reduce them, then work as hard as you can to neutralise as many of your personal carbon emissions/activities as possible, and the businesses you work at, whilst buying from brands that are on the same mission as you.
We are partners with One Tribe, a Climate Action initiative that helps businesses improve their carbon footprint and grow more sustainably.
One Tribe is empowering us to make carbon footprint improvements, and through our partnership and the other efforts we make, working with Apogee helps to protect our planet. Each application we process generates a donation, which in turn protects 5 trees and stores almost 2500 kilos of carbon. These donations are combined from all participating members of the One Tribe community. The funds are paid directly to One Tribe’s conservation partners every month, funding rainforest projects in the Amazon rainforest and other important forests around the globe.
Our collaboration with One Tribe has already produced stellar results. In only six months, Apogee was able to:
Protect 98,317 trees
Save 1,966,355 meters2 of rainforest
Store 48,298.109 tonnes of CO2, equivalent to 304 cars off the road
Curious about how working with Apogee can aid in the fight against climate change?
The maritime sector in the UK is a key channel for the country’s global trade. According to Maritime UK (it facilitates 95% of the total exports and contributes £46.1bn to the British economy, generating over 1 million jobs.
The sector is fundamental for the trade of British goods and services, but also offers recreational benefits that enable tourists to enjoy the UK’s stunning coastline.
As an island nation, Britain strongly relies on the maritime sector and needs to invest in innovation to reinforce its competitive advantage and role as a market leader in the design, manufacture, and refit of commercial, naval and leisure vessels.
Maritime: The 5-year plan for the UK
The UK Government has already set the scene for the future launching “Maritime 2050”, an ambitious plan aiming to strengthen the collaboration between the Government, industry and stakeholders and raise the level of export from Britain to the rest of the world from 30% to 35% of GDP. This will help to maintain the UK’s market share in an increasingly competitive global market (Department for International Trade, 2019).
One of the biggest challenges for the sector at this stage is to reduce carbon emissions and tackle environmental issues. The target is to reduce the level of greenhouse gas emissions produced in 2008 to 50% by 2050.
Companies in the sector are already involved in numerous innovative zero-carbon energy projects, such as the implementation of fuel cells on workboats and ferries, and the automation of vessels, amongst many others. These projects have the potential to scale up in the long term and help the sector to achieve the 2050 target, reinforcing the export market in the UK.
How can R&D tax credits support UK maritime firms?
To carry innovation forward, R&D tax credits are undoubtedly a huge opportunity for companies operating in the maritime sector. Many of the activities that these companies carry out on daily basis are eligible for the incentive.
Some examples of qualifying expenditure for maritime companies are:
The development of engines powered by clean energy, such as hydrogen, for ferries and cargo vessels
The development of construction techniques for maritime structures to increase the level of protection against corrosion and improve durability
The implementation of drone solutions to gather data able to diagnose and resolve issues related to ship defects or enhance security and surveillance
The implementation of monitoring systems to manage emissions and optimise energy consumption
The design of innovative fuel cells including features such as thermal management or physical integration for space optimisation
The utilisation of big data to enhance the efficiency of operations and reduce risks such as delay of shipments
Can your company benefit from R&D tax credits?
Maritime companies have the opportunity to access substantial funds to enhance their business operations and stimulate innovation in the sector through the generous R&D tax credit incentive.
With many years of experience and more than 600 applications submitted, Apogee has built a strong reputation within the R&D sector and with HMRC.
Thinking of submitting an application? Get in touch, you’re in safe hands with Apogee.
Maritime UK, (2022). About Maritime UK. Available at: https://www.maritimeuk.org/about/about-us/
Department for International Trade, (2019). Promoting the UK’s world-class global maritime offer: Trade and Investment 5-year plan 2019. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/964144/maritime-5-year-plan-digital-a4-revised-feb-2021.pdf
The end of a financial year is always a busy time for companies in any sector. Apogee, in partnership with Fusion Accountants, are sharing some useful tips to help you gather all the information you need to report to HMRC, including your R&D Application!
Financial year-end reporting is required by law to guarantee that a company pays the correct amount of tax and to disclose accurate information about the company to the public, banks, shareholders, and potential investors. Therefore, it’s important to arrive to this moment of the year ready for the submission.
1: Preparation is everything
Ensure you have the right strategy in place. Brief your team a few months ahead of time to ensure that you are cutting costs and tracking down outstanding purchase orders and invoices in the run-up to the end of the year. Keep your costs low and ensure they are all processed and entered into your system.
2: Ensure that your accounts are up to date
All of your bills, invoices, bank statements, and other financial records should all line up with your accounts.
If you have not paid for any sales you made before the end of the year, list them as outstanding debts. Ensure all necessary information, such as the invoice number, date, and total amount are up to date.
3: Check your financial statements
Every account type is listed in detail in a chart of accounts, including account codes and numbers for various assets and liabilities. You can easily record information and add or remove accounts. A default chart of accounts that comes with most accounting software (like Xero and SAGE) will work for most businesses, but you can customise it to meet your company’s specific needs if you like.
4: Keep your personnel information up to date
You will need to ensure that all your employment information is valid and up to date at the end of the year. When conducting an audit, HMRC usually examine payroll and expense records to confirm that everything is as it appears. They will also cast an eye over your National Insurance and taxation.
5: Do some much-needed admin housekeeping
Achieve administrative perfection for the whole fiscal year. For example, print and organise receipts and invoices or organise them in folders on your computer system to keep track of them.
You may want to look at Expense Management software like Expensify, Spendesk and Pleo (or accounting software like QuickBooks), which can manage expenses.
Round up all your paper and online documents, so you will be ready if any part of your financial reporting is challenged.
This process is much easier if you get into the habit of staying on top of your financial admin throughout the year. We’ve all fallen into the trap of prioritising other things longer than we should, and before you know it, you’ve got a huge admin task to get through.
Staying on top of it as you go makes your life easier and is more efficient in the long run.
6: Make back-ups
Financial year-end reporting takes a lot of data and time to organise, so regularly back up your accounts and tax return. In this way, if any data is lost, you can pick up from where you left off.
Include your R&D application in your Tax Return Form
The document you need to provide HMRC with is your Company Tax Return Form (CT600). This document will also allow you to submit your R&D Application, which is a great way to offset part of your current and future Corporation Tax Bill or give your business a cash injection.
Before submitting your R&D application you need to remember:
Be aware of your year-end. After the deadline, you lose the option to make an application for your retrospective year. For example:
If your year-end is March 2022, you can recover the costs from the periods ending March 2020 and March 2021, in addition to your current 2022 year after it’s closed off. If you submit your application afterthe end of March 2022, you will lose the option to make an application for March 2020.
You also have the option to reduce your Corporation Tax (CT) bill. Typically, you pay CT 9 months after your business’s year-end. If this is coming up, an R&D application could be a great way to reduce your CT bill!
Consider your company size and make sure you are recovering under the correct incentive – the SME incentive (for small to medium businesses) or the RDEC incentive (for larger companies). Remember, you also need to consider the implications of potential funding received, such as COVID-19 support funding.
3: Understand your recovery options
The R&D benefit can be received in many ways and differs from a profit-making to a loss-making company. The benefits of each recovery option vary depending on the circumstances; profitable companies will get a reduction in future tax payable, or a refund of tax paid, whilst loss-making companies can choose to get a reduction in future tax payable or a cash credit.
Remember, your tax position will influence the way that your R&D benefit will be received. Understanding these implications can help to ensure your recovery is maximised.
4: Use an expert
The guidance provided by HRMC on the R&D incentive is a lot broader than people realise, so it’s important to ensure you are recovering costs from all eligible projects. As there are multiple misconceptions around the costs that are eligible to be recovered, using an R&D expert will ensure you get these correct and are recovering costs against eligible projects .
Don’t get caught in the rush of the year-end submission! Follow these tips and make any month your favourite month of the year!
It’s undeniable that we’re living in the era of technology convergence! The term refers to the integration of two distinct technologies that merge to create a new outcome. From smartphones to drones, blockchain to 3D printers, the modern world is rich with examples of technology convergence and the Internet of Things is one of the most important. It goes beyond the transformation of technologies and creates a network of physical objects (such as devices, vehicles, or appliances) embedded with sensors, software, and network connectivity, simultaneously connected to each other with the ability to share and receive data.
Businesses are shifting from ‘traditional’ Information Technology (IT) to a more advanced Internet of Things (IoT). By 2023, it’s estimated that the number of connected devices will reach 43 billion, with the revenue pool for device-enablement platforms for the Internet of Things expected to reach €14.5 billion in the same year!
At this point, you may be wondering “Why are converged technologies becoming important?”
The answer can be summarised in two words; innovation and competitiveness.
The Internet of Things is intrinsically linked to innovation and enhances the R&D process in many businesses. It has the potential to provide new tools for engineers and technicians to optimise prototyping processes, whilst providing analytical data able to predict the output, quality and lifecycle of new products by using digital twins.
The Internet of Things can also be embedded in machinery for the manufacturing process, and in the products themselves, creating an ecosystem that allows developers to conduct new projects with increased focus, to enhance the development of ongoing projects, and gather data to make informed decisions for further developments and new product lines. The analysis of the manufacturing processes can also help companies that are looking to improve on sustainability, to develop corrective initiatives that reduce waste and improve the sustainability of production.
Incorporating the Internet of Things in businesses and striving toward maximizing R&D efforts is the recipe for success in the modern marketplace. Companies are constantly evolving, concentrating on increasing their levels of resources toward innovation. The key to competitiveness in today’s marketplace is adaptation!
Integrating the Internet of Things into your operations is likely to make your business eligible for R&D tax credit relief. If that’s the case, get in touch with us at Apogee to see how we can help recoup your investment.
During the Autumn Budget 2021, the government announced a number of proposed reforms to the R&D incentive, all with the key focus of further supporting innovation within the UK, whilst also targeting abuse and improving compliance. These reforms are intended to be included within the Finance Bill 2022-23, meaning they will likely take effect from April 2023.
Amendments to R&D Scheme to Extend and Further Support Innovation Within the UK
An area that has been widely discussed for change is the inclusion of data and cloud computing costs. There has long been an intention to align the scheme and its guidelines to accommodate and recognise the latest technology, incentivising modern methods of processing and analysing vast data sets essential for R&D.
As such, the government confirmed that under the proposed changes, both the SME and RDEC relief will be extended to include these data and cloud computing costs. Specifically, license payments for datasets and cloud computing costs attributable to computation and data processing will be brought into the scope of qualifying expenditure for R&D.
HMRC also intend to further refocus the relief towards innovation within the UK. Under the current rules of the incentive, a company can recover costs for a subcontractor irrespective of whether the work is conducted in the UK or overseas. The proposed changes indicate that, where a company subcontracts the work to an external party, relief will only be eligible where the work has been performed in the UK. Similarly, only the costs on Externally Provided Workers (EPWs, or agency staff) that are paid through UK payroll will be recoverable. These principles are to be reviewed before any exact legislation takes effect (from April 2023).
Abuse and Compliance
This is a really key area of the reforms and could impact how R&D is claimed for in the future. It follows HMRC’s intention to cut down the estimated level of error and fraud in R&D applications, and as a result, ensure that the relief is only received by those with a genuine entitlement to it.
HMRC has already acted on this issue, allocating additional resource to the compliance of R&D applications. The further suggested changes will see all claims for R&D relief to be made digitally (both for a reduction in Corporation Tax payable and a tax credit), and will require far more detail on the application. This will involve greater depth on why a project meets the relevant criteria from HMRC (seeking an advance in science and technology through the resolution of technological uncertainty) and what expenditure is being claimed.
Companies will also be expected to inform HMRC of their intention to make a claim in advance. Further, HMRC will require each claim to be endorsed by a named senior officer of the company and will need applications to provide details of any agent who has supported compiling the application.
These changes further highlight the importance of using a reputable R&D provider with a proven track record; reputable providers will already be meeting much or all of this criteria, by compiling a robust application that explains to HMRC why your business and your activities qualify for R&D relief. Whilst these changes are not set to be implemented immediately, it is worth having a discussion with an R&D expert to ensure your company is set up and ready for any changes to the R&D incentive. With a 100% success rate across over 600 applications, the quality of our process and report has ensured Apogee Associates’ clients are already ahead of the future requirements.
If you would like an expert team who are committed to sustainability to compile your R&D application, fill in the form below and one of us will be in touch!
The agriculture sector is a critical asset for the UK economy and, now more than ever, the sector has an enormous opportunity for growth following the decision of the UK to leave the European Union.
In one of its latest publications, the Institute of Economic Affairs recommended and encouraged UK agricultural businesses to adopt a more positive approach towards new technologies and environmentally friendly practices to enhance the sector’s competitiveness. Agriculture research and development (R&D) is a crucial determinant of the sector productivity, which directly influences the food prices for us all.
Controversially, according to HRMC, the total amount of benefit from R&D tax credit applications for agricultural businesses accounts for less than 1% of all applications whilst the average relief is far lower than the national average.
On the other hand, agricultural businesses have historically sought and implemented innovative ways to enhance their productivity and profitability, which means there is a significant untapped opportunity to exploit the R&D incentive within the sector.
The question to ask at this point seems to be clear; why are agricultural businesses not taking full advantage of the relief?
Based on our experience, agricultural entrepreneurs and innovators are often unaware of the R&D tax credit incentive or simply misunderstand the concept of R&D from a tax context, strictly associating it with traditional tech and pharma developments.
One key cause for this is the guidelines provided by HMRC, which are extensive and complex for who are unfamiliar with the incentive. Therefore, business owners (experts in their respective field, but not in R&D tax) regularly struggle to understand the eligibility requirements, let alone compile a comprehensive report to submit to HMRC.
We highly recommend taking advantage of an R&D tax expert provider, such as Apogee Associates, to help your business taking full advantage of the relief, make the whole process simple and straightforward by compiling the report on your behalf, and ensure you access the most amount of relief net of fees.
You are likely to be eligible for R&D Tax Credits if you are conducting activities aiming to:
Enhance the efficiency of water and energy consumption
Improve processes efficiency through the use of technologically advanced machines
Innovate using unique soil management techniques
Reduce the use of natural resources without impacting yield
Implement environmentally friendly countermeasures to disease, bugs and natural events
Attempt to advance biotechnology
Innovate through implementations of vertical farming processees
If you want to know more about the incentive and see if it could apply to you, reach out to our team of experts; we will be happy to offer you free of charge consultation to introduce you to the R&D relief and explore how you could benefit!
If you would like an expert team who are committed to sustainability to compile your R&D application, fill in the form below and one of us will be in touch!
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