Agriculture sector: Discovering the R&D tax credit relief

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!

 

Apogee Associates R&D Tax Credits

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!

R&D Tax Credit Statistics – September 2021

HRMC recently released its latest R&D tax credit statistics, including all the applications submitted up to the year ending March 2020 under the Small and Medium Enterprise (SME) and large company (RDEC) incentives. The information included in the report offers an overview of the progress of the Government plan to reinforce the UK leadership in research and the innovation of the country’s economy and highlights opportunities for companies that haven’t benefited from the incentive yet.

COVID-19 has certainly slowed down the process and it will be necessary to wait for the following HMRC publication to evaluate the real impact of the pandemic on the R&D numbers.

However, the Government is confident in considering R&D as the key to reinventing many businesses in response to the COVID-19 crisis by embracing science and progress to build a brighter future for the nation.

The following table highlights some of the key points emerging from the report:


R&D tax credit relief overview

The total number of R&D applications for the year ending March 2020 is estimated to reach 85,900, registering an increase of 16% from the previous year. The numbers are expected to increase due to the retrospective nature of the incentive, which will enable companies to make an application for the year ending March 2020 until March 2022.

SME applications account for almost 89% of the total with an annual growth of 16%, reinforcing their role as the main drivers of general growth in applications submitted. A further breakdown of the SMEs numbers indicates that 38,050 claims are purely for a Corporation Tax liability deduction, whereas 38,175 include a payable tax credit.

Under the RDEC incentive, 4,370 large companies benefit from the relief and a further 5,305 SMEs qualified for the RDEC scheme as subcontractors.

Overall, the RDEC scheme has seen a growth of 12% compared to the previous year.

Number of claims for R&D tax credits by scheme, 2014-15 to 2019-20

Map of the R&D applications submitted by region

Despite the presence of numerous innovative companies, many regions show a low number of submitted applications, meaning that there is still a lack of awareness in these areas. On the contrary, companies in Greater  London seem to be familiar with the R&D tax relief showing the highest number of applications submitted in the country,    over 17,000 (20% of the total number) and around £2.3 million claimed (30% of the total amount). The Southeast shows the second-highest number of applications submitted (11% of the total), whereas the North East (slightly over 3% of the total) highlights an area that may not be fully benefitting from the scheme in comparison to the rest of the country.

Number of R&D tax credit claims by region of company registered address, 2019-20

R&D total amount claimed by sector

From the figure below there is no surprise in seeing the Information and Communication, Manufacturing and Professional, Scientific and Technical sectors showing the highest amount of R&D tax credit relief claimed. However, this should not discourage other sectors to explore the incentive. Based on our experiences, many companies miss the opportunity to recover the money invested in innovative projects because they misunderstand the concept of R&D, strictly associating it with white coats and scientific departments, while instead, the definition provided by HRMC is much broader than that.

Amount of R&D tax credits claimed by industry sector, 2019-20 (£ million)

Summary

Overall, the trend of growing investment in R&D remains uninterrupted despite the impact of the pandemic. The latest figures shine an optimistic light on the possibility of achieving the Government’s goal of reaching a total R&D expenditure of 2.4% of GDP by 2027. In this context SME’s play a key role, which is confirmed once again by the number of first applications submitted.

Number of first time applications by scheme, 2014-15 to 2018-19

If your company have recently had to overcome uncertainty in the attempt to develop a novel solution in the field, you are most likely eligible for the R&D tax credit relief.

As highlighted by the figures, many sectors are not taking full advantage of the incentive. Agricultural businesses for example, as well as many others, are constantly evolving and developing innovative solutions to enhance their competitiveness, the cost of which can be recovered!

Furthermore, the increasing number of applications submitted by SMEs will hopefully incentivise others to pursue the substantial cash injection for their businesses.

If you’re still unsure about the eligibility of your activities, get in touch with one member of our team of experts.

Apogee offers an initial, free-of-charge consultation with no further commitment. Our mission is to promote innovation and sustainability within the UK businesses and help them reach their Apogee!

 
Apogee Associates R&D Tax Credits

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!

Shifting towards sustainable production: an overview of the beer industry from an R&D perspective

The UK beer market contributes to 16.3% of the whole European market value, second only to Germany. Although many companies in the sector are investing in innovative brewing processes and the development of new products, only a handful are recovering everything available to them through the R&D tax credit incentive.

How is the UK beer market recovering after the pandemic?

It’s safe to say we like our beer! However, as reported to Mintel, Covid-19 heavily impacted beer sales due to the closure of pubs and restaurants. It is estimated the sector will not recover and reach the levels pre Covid-19 until 2024. In addition, the overall consumption of beer in the country is falling – mainly due to the spread of health-conscious attitudes amongst the British population. Consumers are increasingly oriented towards healthier options such as non-alcoholic and low-calorie products (likely in an effort to mitigate the beer belly). These are, in fact, two of the major trends shaping the market, alongside the rising desire for sustainably brewed beer. Particularly, consumers aged 18-24 are concerned about sustainability and tend to prefer sustainable brands over others when it comes to purchasing decisions.

R&D tax credits to implement a sustainable production 

In terms of sustainability, the consumption of water is one of the biggest issues related to the sector. Beer itself is primarily water, which, on average, accounts for 90% of the product’s composition. The consumption of water is not strictly related to the production process only, but also to washing and other operational-related activities involving the brewing process. Although water usage does not hugely impact the breweries’ costs, it does impact the environment, as water scarcity represents one of the major threats for the planet’s future. As such, many breweries in the UK are developing new mechanisms to reduce the consumption of water, and many of the costs associated with this innovation can be recovered under the R&D tax credit incentive – often resulting in a significant cash benefit to the business.

Increasing the use of renewable energy and recyclable packaging are two additional changes that must be implemented in order to make the production of beer a more sustainable process. Various major players within the beer market have started ‘move to zero’ plans, aiming to become powered by 100% renewable energy. Similarly, an increasing number of producers are switching towards recyclable packaging – incentivising the return of empty containers from consumers in order to reduce wastage. As with the reduction of water consumption, activities associates with the reduction of unsustainable energy usage and wastage using innovative technologies and processes can also be recovered under the R&D incentive; importantly, brewers can recover the cost of staff time, consumables (including some ingredient and utility costs) and subcontractors associated with such projects!

However, R&D is not limited to the above. In fact, the process of developing new beers, such as those with unique flavour or aroma profiles, or ever non-alcoholic, gluten free or low-calorie options can qualify as an R&D project.

If you are running a brewery and are wondering whether your activities qualify for R&D, get in touch with one of our experts. We’re always happy to have a quick exploratory chat!

Apogee Associates R&D Tax Credits

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!

R&D Tax Credits with Apogee

If you want to explore whether your small, medium or large business is eligible for R&D tax credits, Apogee can help. The process can seem overwhelming, so to simplify things somewhat, here is an overview of the process we will guide you through.

Applications Compiled with Expertise

Every application benefits from the expertise of our small, highly knowledgeable team. In addition to retaining consistent points of contact throughout the process, you can feel assured that your application is being compiled, overseen and reviewed by qualified and experienced R&D tax credit specialists.

This means that we can offer our clients the best possible recovery, net of our fee, which will always be completely contingent on the success of your application. We can say that with so much confidence because we have successfully uplifted the outcomes for many existing applications that were originally submitted by leading R&D providers, plus many of the minor R&D providers as well. For this reason, we won’t ask you to lock yourself into an iron-clad contract with us. You’ll want to continue using our service because it’s the best around.

Invest in Quality Solutions for your Business with Apogee

Our uncompromising dedication to quality has resulted in an application success rate of 100%. In addition, all our applications have been completely unqueried, and every single application we have submitted has been awarded the full amount of funding.

We are proud to support small, medium and large businesses because we believe that eligible enterprises of all sizes should have full access to the funding they need to thrive and continue to make key contributions to innovation and development. If submitting an R&D application is likely to benefit your business, we guarantee that we will give you the support you need every step of the way.

Our Dedication to Sustainability

In addition to being fully committed to ensuring all areas of our business are operated in the most sustainable ways, we want to help our clients be more sustainable too. Therefore, for every application we process, we provide the resources for the planting of a brand-new grove of trees, and fund the protection of a significant area of rainforest. We only have one planet and we all need to make sure we’re doing our bit to protect it before it’s too late.

Our Values

Apogee was founded on one fundamental idea; that business can be and should be a powerful force for good in the world. We are a values-based business; our passion for fairness underpins our desire to operate as ethically as possible, setting us up to continue making a difference long into the future.

We operate on the belief that respect cannot simply be acquired. Instead, respect comes from the maintenance of the highest professional standards and a constant drive to do better; we subject every decision we make and action we take to the same high level of scrutiny that has allowed us to get to where we are right now. Perfection is unachievable, but we will never stop continuing to improve our approach to get as close as possible to that ideal state.

Connecting with Apogee

If you’re keen to find out more about what we do or how we could help, we’re eager to hear from you. We’ll start with an introductory call (completely free of course) during which we will work to understand your business and determine which activities will qualify for R&D tax credit support. There is no obligation to continue with your application after this call, but we’re confident that our expertise can help you to secure the investment your business deserves and is entitled to.

We’re passionate about our journey and we want you to join us. The road to innovation should always be an enjoyable one, which is precisely why we will ensure that you and your team have an excellent experience with us. We can’t wait to hear from you!

Apogee Associates R&D Tax Credits

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!

Engineering: Maximising your R&D Application

It is no surprise that the engineering sector is one of the most widely claimed industries for R&D tax credits; whereas many sectors are unaware of the incentive or wrongly believe they do not qualify, many established engineering firms are familiar with the benefits of the R&D mechanism.

However, while lots of organisations in the engineering sector are recovering their costs through the incentive, their recovery is often a fraction of what they are entitled to. 

From our experience, we’ve found companies in the sector are identifying “obvious” R&D expenditure, such as staff costs and material costs, but many less obvious costs are erroneously excluded.

Also, in many instances, applications are submitted without a supporting report detailing the R&D activity. While it is not a requirement from HMRC to provide this supporting information (unless the application is queried), submitting an R&D application without a report can expose the company and increase the likelihood of a query.

If you operate in the engineering sector, and are unsure whether you’re getting everything you’re entitled to, without exposing yourself, ask these questions;

  • Has what qualifies and what does not qualify been explained?
  • Do I have a robust technical report that details my activity?
  • Have I been guided through the process of identifying eligible expenditure?
  • Will the application be defended in the event of a query?
  • Do the costs I’m recovering seem reasonable in comparison to my R&D activity?

If any of these questions are answered with a no, you may not be benefitting from the full breadth of the R&D incentive. If this is the case, please do get in touch, one of the team would be more than happy to assist! 

Apogee Associates R&D Tax Credits

If you believe you are still leaving money on the table or would like a FREE review of your existing application, fill in the contact form below and one of our team will be in touch!

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 a 100% success rate 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 Tax Credits in the Pet Sector

The UK’s pet sector has benefitted from consistent growth in recent years and is forecasted to continue to do so. Growth actually increased throughout Covid-19, due to a rise in pet ownership; the Pet Food Manufacturers Association (PFMA) confirmed 3.2 million UK households acquired a pet since the start of the pandemic, resulting in a total of 17 million pet owning homes throughout the country.

The increase in pet ownership has likewise increased the demand for pet products, including food, toys, medication and treats. Many UK companies operating in the sector have seen increased sales and growth, enabling them to dedicate more resource towards improving their products and processes through research and development. The sector’s growth has increased competition, making it important now more than ever to differentiate through innovation.

Like in many sectors, a surprising number of companies operating in the pet industry are conducting eligible R&D activity yet do not benefit from the incentive. This is partly due to unawareness of the incentive, but misconceptions regarding qualifying R&D activity are also to blame.

Some examples of R&D in the pet sector include;

  • Developing nutritious food/treats, especially “free-from” options
  • Developing toys, beds or accessories that achieve specific technical properties without compromising comfort (i.e. antibacterial)
  • Improving manufacturing processes by reducing waste, minimizing costs or increasing efficiency
  • Investing in sustainability; developing products or packaging using recycled or eco-friendly materials
  • Developing, modifying or integrating software to improve operations

If you operate in the pet sector and are unsure whether you’d be eligible for an R&D tax credit application get in touch! We are always happy to have an exploratory conversation to see if we can help.

Be Rewarded for Your Lockdown Innovations

Problems Ideas Solutions

2020 was an incredibly difficult year for all; the social and economic impacts of COVID-19 and lockdown restrictions have been significant for many individuals and business. However, amongst these challenging conditions, there have been incredible success stories of companies who have reacted to this environment and have been able to adapt and thrive.

For some business owners, the lockdown served as an opportunity to step back from the daily operations of the business and allowed more time to focus on innovation; we have seen the development of new products and service offerings as well as the modification and upgrade of existing ones. Conversely, some companies were forced to reinvent their business, with existing offerings and processes rendered unfeasible during lockdown. For example, many businesses in the exhibitions and events industry pivoted with great success! Whilst lots of business owners do not realise it, this period of adaptation and innovation has inadvertently seen significant amounts of Research and Development (R&D) being undertaken.

R&D Tax Relief is a generous government-ran incentive that allows companies to be rewarded for these innovative activities, through either a Corporation Tax reduction, refund or cash credit. Essentially, the incentive allows companies to receive between 19-33% of the funds that they have incurred on R&D expenditure (and can be recovered up to two years retrospectively).

Apogee have been in the fortunate position to be able to support companies with their applications for R&D Tax relief, helping businesses gain access to what can often be vital funding. This has helped support companies through this difficult economic climate whilst also enabling them to continue investing in innovative R&D activities.

There are a wide range of activities that companies have undertaken in the past year. The below serves as some brief examples of activities undertaken during “lockdown” that could qualify for R&D Tax Relief, but are no means exhaustive:

  • The development of bespoke IT systems and software, to allow to company to move from an office based to a more remote and virtual working environment.
  • The development of new products aimed to help to tackle and mitigate the risks of COVID-19 i.e. facemasks, PPE and remote hand wash stations.
  • The modification of existing products in order to comply with new guidance e.g. adding antibacterial properties or the production of protective screening.
  • Companies who have pivoted operations/offering to develop new products e.g. a gin company who pivoted to the development of hand sanitiser.
  • The conceptualisation and redesign of processes and systems to accommodate new guidance e.g. social distancing, whilst maximises efficiency of operations.
  • The development of automated processes to account for the reduced number of staff able to attend and work on-site.
  • Design and development of online platforms and portals to allow companies to operate entirely online e.g. the integration of sales/accounting/CRM systems, or the development of bespoke ordering/booking systems.

The team at Apogee would welcome the opportunity to learn more about the innovative activities that companies have undertaken and to guide you through how these activities may allow you to benefit under R&D Tax Relief.

R&D Tax Credits and CAD

R&D Tax Credits and CAD

When many people think of Computer Aided Design (CAD), 3D renderings of complex engineering prototypes come to mind. However, CAD software is extremely versatile and has changed the design process across countless industries for the better.

The introduction of CAD made in-house research and development feasible for many organisations that previously lacked the resources to dedicate towards it. This is in part due to the fact that it is no longer necessary to invest significant resource (in terms of both time and materials) in designing, prototyping and proofing physical concepts, as CAD enabled these activities to be accomplished in a virtual setting with no material cost.

While physical prototypes are often still necessary further down the development road, the ability to design and test ideas in a digital environment alleviates much of the cost associated with the creation of new products. Because of this, CAD software has provided many SMEs with the tools they need to innovate, without requiring substantial reserves or capital.

That brings us to the relationship between R&D tax credits and CAD. In many cases, costs associated with testing, and the development of both 2D and 3D designs, can be recovered through the R&D mechanism; the caveat being the nature of the CAD activity.

If you’re using CAD to develop bespoke 2D or 3D designs in which the optimum design is not immediately obvious, or where there is uncertainty as to whether a suitable design can be developed at all, you are likely eligible to recover your costs.

Additionally, if you’re testing potential designs in the software and regularly forced to iterate and modify their configuration as a result, you will find an R&D tax credit application incredibly worthwhile.

If your company uses CAD and you’re unsure whether you should be applying, or if you’re already submitting applications but believe there’s money being left on the table, get in touch with one of our team – as always, we would be happy to help.

R&D Tax Credits: Linked and Partner Enterprises

Linked and Partner Enterprises

Linked and Partner enterprises are terms used by HMRC to define the nature of a relationship between companies with common shareholders. If you have common shareholders in your company, it’s important to understand how these work, as it may have an effect on whether or not you’re able to recover your R&D costs at the more beneficial SME rates (19%-33%), or at the lower RDEC rate (10.5%). We’ve translated the HMRC language to make it easier to understand how HMRC would categorise your relationships.

 

Linked Enterprises

Linked enterprises are defined as those in which one enterprise is able to exercise control, either directly or indirectly, over the affairs of another . Put simply, where a company has a majority (greater than 50%) of the shareholder’s voting rights in another enterprise, it is considered “Linked”. Though this is the most common method of determining whether a company is linked, there are actually several “tests of control” to determine whether one enterprise directly or indirectly controls another. For example, having the right to appoint or remove the majority of the members of the administrative, management or supervisory body. These tests of control would need to be applied to each company’s specific circumstances and are a topic in and of themselves; we will delve deeper into these “tests of control” in future articles.

For cases where a company has a linked enterprise, you need to aggregate all linked company figures to assess eligibility. So you would combine the entire turnover, balance sheet total and employee numbers of all enterprises when assessing eligibility.

 

Partner Enterprises

A company is considered a partner enterprise when one entity owns over 25% of the capital or voting rights in the other, but the two are not linked (as above). In cases where a company has a partner enterprise, a relevant proportion of their figures must be included when assessing its position against the eligibility criteria. For example, if a company has a 30% corporate shareholder, it would include 30% of the shareholder’s turnover, balance sheet and employee totals.

 

To illustrate these differences, here is an example:

Company A owns 70% of Company B which owns 25% of Company C. Company A wishes to make an R&D Application.

 
  • Company A and B would be considered linked enterprises. Company A would therefore need to aggregate 100% of Company B’s figures when assessing eligibility.
  • Company B and C would be considered partner enterprises. Further, when assessing eligibility, Company A would need to consider 25% of Company C’s figures.
 

Autonomous Enterprises

An autonomous enterprise is any entity that is not considered partnered or linked. As such, a company is autonomous if another company owns less than 25% of its shares, or if it owns less than 25% of another company. There are some specific instances in which a company may still be considered autonomous, despite an enterprise exceeding the 25% threshold. For example, if a venture capitalist firm or institutional investors own more than 25% of the shares, but less than 50%, a company could still be considered autonomous and thus not need to consider the figures from the other entities (providing they are not linked to one another). The relaxation of the 25% threshold is limited to cases of specified investment enterprises that play a positive role in business start-up and financing . See the Company Eligibility page on our website for more examples of entities which enable a company to retain its autonomy.

Eligibility is a complex topic and whilst we have not exhausted all of the nuances, it has hopefully served to clarify the main differences between autonomous, linked and partner enterprises. Of course, if you are exploring an R&D tax credit application with Apogee, we will do all of the necessary eligibility assessments for you, so you can feel safe in the knowledge that you’ll be getting the best recovery through the correct avenue. If you’re unsure of what category you’ll fit into, get in touch; we’re here to help.