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R&D Tax Credits: Claim for Your Innovation

Businesses in the forestry sector are potentially missing out on an average of £48,000 in R&D tax credit savings, says Dominic Bartholdi, Head of Business Development at R&D tax specialists GovGrant.

With HMRC data revealing that the UK agriculture, forestry and fishing sectors made up just over 1% of UK R&D tax credit claims, those operating in the industry are encouraged to consider whether they might be eligible. In the UK companies are able to claim tax relief for their R&D activity. The schemes, for SMEs and larger companies, are both administered by HMRC. Typically SMEs get back up to 33% of the amount they’ve spent on qualifying R&D. Large companies could get more than 10% of their R&D spending refunded.

The misconception is that it’s an innovation tax credit only suited to those in white lab coats and in digital sectors, but in reality it’s applicable to any business that has developed and used innovation in its process. Here HMRC defines innovation in terms of overcoming scientific or technological uncertainty, something that couldn’t be worked out easily by a professional in the field.  It can even be applied to for tax savings on innovation that has failed.

There are five broad categories which can classify forestry R&D claims: staff costs, subcontractors, externally provided works (EPWs), software and consumables like heat, light and power.

We know that forestry businesses of all kinds are now benefiting from refinement through technology. R&D tax claims can come from process improvements, production improvement and scalability and quality control. And we see this happening in all aspects of agriculture, including:

  • Implementation of scientific advancements, including hydrology, biology and geology
  • Disease prevention
  • Management of forestland, including use of high-tech surveying and analysis tools
  • Post-harvest advancements to process raw materials into products
  • Hydrological and biological research.

Even when businesses are already claiming R&D tax credits, they might not have fully explored the potential of that claim. For example, we had an agricultural client who hadn’t considered a key project as R&D. In this case, day-to-day work was carried out to monitor the crops under specific trial conditions and collect data, and that was time spent on R&D. It was similar with indirect personnel who were working to enable that R&D.

So much activity that could be considered good forest management practice would qualify as R&D – for instance, gaining insight into growth conditions, discovering novel ways to improve yield or ways to save money on the management of forestland. In agriculture, forestry, and fishing there are so many examples where we’ve seen specific innovations which were all qualifying expenditure for R&D tax credits:

  • Tracking pests and response to different pest control processes
  • Investigating new ways to use waste materials in a novel bioreactor as a means to reduce energy costs
  • How different varieties of tree grow and respond in the same/different growth conditions
  • Looking at why pollination is low over the past few years, tracking bee populations and activity

If there’s a moment where something unexpected has impacted your land management whether through disease, climate change, pollution or any other factor, then any time spent looking into why this may be the case could be qualifying R&D. Any machinery you’ve tweaked for working in a woodland or park, to improve a particular function or purpose specific to its situation, could be R&D. Anything you’ve tried as a way to save money or drive efficiency – whether it worked or not. Either way, it could be qualifying activity.

More at: HMRC data – Research and development tax credits www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit
www.govgrant.co.uk

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