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Markel Tax

27 Apr 2020

Agricultural sector missing out on R&D claims

Research and development (R&D) tax relief is a significantly under claimed relief within tax incentives, especially in the agricultural and horticultural sector. Recent research shows that companies working in the farming industry are, unfortunately, some of the most likely to lose out on a significant amount of tax relief. However, taking the time to assess the activities undertaken can deliver a crucial cash flow benefit to businesses that could be invested into future projects.

According to HMRC, only 385 claims were submitted by UK agriculture companies in 2018, resulting in £20 million benefit. This amount accounted for less than 1% of total R&D tax credit claims while manufacturing, scientific and IT sectors, continue to have the greatest volume of claims, making up 68% of claims and 73% of the total amount claimed.

The key factor for such a small number of agricultural claimants is either a lack of knowledge of the scheme, or a lack of understanding about what types of projects qualify. Due to phrases such as ‘scientific and innovation’, most companies immediately disregard themselves because they are not laboratory or technology based. However, farming businesses should not automatically assume that they will not qualify, as many of them often carry out work that falls within the scope of R&D, even if they do not think of it in those terms themselves. R&D tax relief applies to all industries; it is simply a matter of identifying where your innovations meet the criteria. 

Examples of qualifying activities in the agricultural sector might include:

  • introducing new methodologies to optimise crop yields and the performance of new and existing crop varieties

  • implementing new strategies for disease mitigation in livestock

  • innovative use of drone technology or the use of sensors in a new or improved way

  • intelligent software analysis for pest and disease prediction, soil management and other analytical tasks

  • smart irrigation

  • vertical farming

  • development of new machinery and components, or adaption of existing technology

In a world of growing demand and increased awareness of sustainability, the UK is rapidly becoming a leader of agricultural innovation providing valuable opportunities for businesses to claim the R&D Tax Credits they are entitled to. Whether it’s striving to maximise production processes by growing more food whilst decreasing land usage, or placing sensors in the soil to achieve an optimum balance between crop growth and water usage, these are all qualifying activities which are often overlooked. It is important that accountants have an understanding of the type of projects their clients are undertaking or planning to undertake, so they can be aware of any potential activities that might qualify for a claim.

For further information and assistance with R&D claims, contact Cintia Breitner at Markel Tax on 0114 212 8294 or Justine Dignam 0207 953 6546.

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R&D and the Construction Sector – Building a claim