Recent figures have shown that British farms and the UK farming industry received less than 1% of all research and development (R&D) tax credits offered by the UK government in 2017. The annual statistics were published by HM Revenue and Customs (HMRC), including data about the number of claims for R&D tax credits and the associated cost. An average of £41,000 per company was claimed in R&D tax credits by those working in agriculture, fishing and forestry industries. That’s less than half the national average across all other UK industries (£85,000).
R&D in agriculture
There is a feeling across UK agriculture that the industry is yet to fully acknowledge the potential of the initiative. This comes according to tax advisers, Momentum Group. Tom Verner, group managing director, Momentum Group, said:
‘While HMRC statistics show many industries in the UK are wakening up to the benefits of R&D tax credits, the potential is far greater.’
The concept behind R&D tax credits is that the tax savings for Britain’s farmers can be reinvested into technological innovation to underpin exports, employment and the UK’s regional economies.
It is perhaps no surprise that the take-up of R&D tax credits is so low among UK farmers given that the title of the tax-saving scheme conjures images of it being exclusively available to those in white coats in laboratories or those investing tens of millions into state-of-the-art technologies. That could not be further from the truth.
Financial R&D support
The UK government has set aside millions of pounds to give tax reliefs to businesses in all sectors. This is aimed at companies investing time and money in advancing their respective industries, and that includes the agricultural sector.
Britain’s farmers should do more to benefit from this accessible tax incentive; particularly those who are attempting to develop new technologies to improve efficiencies or simplify legacy processes. All it takes is a single phone call or email to find out whether your R&D activities qualify.
There are two types of R&D tax support available for the agriculture industry, depending on the size of your business:
SME R&D relief
This is aimed at agricultural companies with less than 500 employed staff and a turnover of less than €100m. Alternatively, they would require a balance sheet of less than €86m. Businesses can remove 130% of all R&D costs incurred from their annual profits, as well as the usual 100% deduction. This is also available to loss-making farmers. They’ll have the ability to claim back a maximum of 14.5% of any surrenderable loss.
Research and Development Expenditure Credit (RDEC)
Large-scale agricultural firms with over 500 employed staff can claim RDEC. This relief is also available to firms who are subcontracted to take part in an R&D project on behalf of a large company. RDEC enables large agricultural companies to claim 11% tax relief on all qualifying R&D costs.