R&D tax credits for farmers and agriculture

The good news: there’s meaningful government support for innovative farms and agri-businesses if you know which scheme fits and how to evidence it properly. This article explains how R&D tax credits work for agriculture, what they can cover, why take-up is still low, and how grants and Patent Box can complement a longer-term innovation plan.

R&D tax credits for farmers and the agriculture industry

R&D tax relief for agriculture is not a niche scheme. It’s part of the UK’s mainstream innovation support available to any UK limited company that is tackling genuine scientific or technological uncertainty, regardless of sector. Under the current rules, most companies claim through the merged R&D scheme for accounting periods beginning on or after 1 April 2024.  

In farming, “science and technology” often shows up in practical places:

• Automation and robotics in unpredictable environments
• Sensor systems and data processing that must work reliably in-field
• Novel growing systems and controlled environments
• Low-emissions processes and new ways to measure or reduce impact
• Machinery adaptation and prototyping where standard approaches fail

What matters is not how “high-tech” the project sounds, it’s whether you had to solve technical uncertainty using a systematic approach (trial, iteration, testing, development).

What is an R&D tax credit for farmers?

For accounting periods beginning on or after 1 April 2024, R&D tax relief for most businesses sits under the merged R&D tax relief scheme, with Enhanced R&D Intensive Support (ERIS) as a separate option for some loss-making, R&D-intensive SMEs.  

Under the merged scheme, an agricultural limited company may be able to claim if it is:

• Developing or adapting technology, equipment, processes or software in a way that isn’t readily achievable using existing knowledge, and
• Working through real uncertainty with testing or development (not routine upgrades or standard implementation).

If your costs qualify, the credit rate is 20% of qualifying R&D spend and it is treated as taxable income, so the net benefit depends on your company’s tax position and how the credit is utilised.  

If you are a loss-making SME and your business is R&D-intensive, ERIS may offer a better cash outcome in the right circumstances (the rules and calculations differ). Speak to our team to find out which scheme you sit under.

Average farmer R&D tax relief amount

HMRC’s latest published statistics (released September 2025, covering tax year 2023–24) show 46,950 total claims across the UK and around £7.6bn of support claimed, linked to £46.1bn of qualifying R&D spend.  

Agriculture, forestry and fishing remains a smaller slice of total claims than sectors like manufacturing and information & communication, but that’s exactly why the opportunity can be attractive for farms and agri-businesses doing genuine technical work: many simply don’t recognise their development as R&D in HMRC terms.

The takeaway is simple: if you’re tackling real technical uncertainty (not routine upgrades), the relief can be meaningful and help fund the next round of practical innovation.  

Why don’t more UK farmers claim R&D tax relief?

There are three recurring reasons we see:

“We’re not a tech business”

Farming innovation is often practical, iterative engineering. It doesn’t look like typical R&D projects, but it can still qualify if it meets HMRC’s criteria.

It gets confused with buying kit

Purchasing off-the-shelf equipment and installing it is usually not R&D. The R&D is the development work you do when the off-the-shelf route doesn’t work and you must engineer new solutions.

Worry about scrutiny or admin

The regime has become more compliance-led, with stronger expectations on evidence and reporting. That’s not a reason to avoid claiming, it’s a reason to claim properly, with robust records and a clear technical narrative.  

What qualifies as agricultural R&D tax relief?

A project may qualify when you are seeking an advance in science or technology by resolving technical uncertainty that a competent professional cannot readily deduce at the outset.  

If you identify qualifying projects, the next step is to map qualifying costs to those activities. Under HMRC guidance, qualifying cost categories include (where they relate to qualifying R&D):

• Staff costs (pay, employer NIC, pensions)
• Externally provided workers and subcontracted R&D (treatment depends on structure and responsibility)
• Software, data and cloud computing used for R&D
• Consumables and certain prototype costs  

Record-keeping tip: HMRC recommend keeping records of R&D-related costs from the moment they’re incurred, it makes retrospective claims far easier to support.  

Example R&D agriculture projects

The possibilities are broader than most farms expect. Examples that can be strong candidates (when there is genuine technical uncertainty and systematic development) include:

IoT sensor networks that must work in harsh, variable conditions

Developing reliable data collection, connectivity, calibration, and automated decision rules where standard approaches fail in-field.

Drone, satellite or machine-vision crop monitoring

Building new methods to collect, clean and interpret imagery or agronomic data to deliver reliable decisions, not just “using a platform”.

Low-emissions and efficiency innovations

Designing and testing new approaches to reduce emissions, improve nutrient utilisation, or optimise inputs without compromising yield or quality.

Automation and robotics

Prototyping automation in complex environments (uneven terrain, variable crop states, inconsistent lighting/weather) where performance is uncertain.

Controlled environment or vertical farming adaptations

Developing new technical control strategies, system configurations, or growing processes where outcomes are uncertain and require experimentation.

A practical rule of thumb: if your team had to run trials, iterate, or build something because “the standard solution didn’t work”, it’s worth exploring.

What you need to know to claim R&D tax relief

To claim confidently you need three things:

A competent professional viewpoint

Someone who understands the relevant science/tech should be able to explain what was uncertain and how you worked through it.  

Evidence built from delivery, not reconstructed later

Keep design notes, trial plans, test results, iteration logs, and decisions. That’s what turns “we did something innovative” into an HMRC-ready claim.

Clean cost logic

The best claims map costs to projects and activities in a way finance and technical teams both recognise, aligned to HMRC’s qualifying cost categories.  

‍Incorporating grants and Patent Box for farming businesses

R&D tax relief is often the baseline. But many agri-businesses can strengthen their innovation strategy by combining incentives:

Innovation grants

Defra and Innovate UK’s Farming Innovation Programme runs competitions specifically to fund projects that benefit farmers, growers and foresters in England.

Within it, ADOPT supports farmer-led innovation and on-farm trials, with regular rounds and published competition timelines. The trick is using grants to fund specific milestones (feasibility, trials, demonstrations), while using R&D tax relief to support the broader underlying programme.

Patent Box

If your business owns or exploits patents (e.g., machinery, sensors, control systems, novel processes), Patent Box can reduce Corporation Tax on qualifying patent-derived profits to an effective 10%.  

R&D tax relief supports development spend; Patent Box supports commercialisation profit. For fast-growing agri-tech businesses, that combination can be powerful.

A quick note on using R&D funding advisors

There are excellent advisors in the market and also some who push aggressive, poorly evidenced claims. HMRC scrutiny is higher now, so it pays to work with specialists who keep claims compliant and well supported.