Blogs/Vlogs

Farming, agriculture and R&D

27 March 2017

Agriculture is a constantly evolving industry with farmers striving to improve products and increase efficiency.  Many farmers may be engaging in research and development (R&D) activities on a daily basis without realising it. Many people wrongly believe that R&D is only carried out by scientists in laboratories, and are missing out on valuable tax incentives.

R&D tax credits are a Corporation Tax relief that can reduce your company’s Corporation Tax bill, or even generate a cash credit.  It should be noted that as it is a Corporation Tax relief, it can only be claimed by companies.

Your company can claim R&D tax relief for projects that seek to advance knowledge or capability in the fields of science or technology. Projects such as new or improved feeding techniques for livestock, development of new fertilisers and improved processes to increase yield are only a few examples that may qualify for R&D tax relief.

Whilst many in the farming industry trade as sole traders or partnerships, the benefits of R&D may mean that incorporation is an attractive option.  For companies making a profit the R&D tax relief will reduce the tax liability.  For those companies that are loss making a loss you can choose to convert the loss to an R&D tax credit, which is a cash sum paid to you by HMRC.

For small companies, tax relief is given by way of an enhancement for costs relating to the R&D project. Allowable costs include employee costs, materials, software and utilities.  The enhancement is 130% of the costs.  This means that for every £100 spent on R&D you can save £26 on your Corporation Tax bill.  For loss making companies you can receive £33.35 cash for every £100 spent on R&D.

As farmers often face cash flow issues, R&D cash credits can help to alleviate this, allowing you to focus your attentions on your day to day business.

We can help with the identification of projects that will qualify for R&D tax credits - identifying the allowable costs and submitting the claim to HMRC.

For further advice please contact me, Catherine Brunsden, or your local UHY rural and agriculture sector expert.

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