Food and beverage is one of the industries with the lowest amount of claims; in 2015/16 only 20 claims were made, accounting for 0.28% of all claims. In 2016/17 this number increased to 140 claims, still significantly lower than most other industries.
Lower claims can usually be accounted to a lack of knowledge around R&D tax credits and not recognising the work that happens within the sector qualifies under the government scheme. We’re glad to see gradually more claims from the sector in recent years, rewarding innovation within the food and beverage sector.
Other areas of the food & beverage industry include:
While there have been many noteworthy events this year, the effect of the COVID-19 pandemic on the food and beverage industry is huge. The pandemic changed the way consumers shop, socialise, entertain and more – which is why it will be the biggest driver of food and beverage trends next year. Products that promote health and wellness, escapism and value will be in the spotlight because they provide relief from many of the challenges consumers are facing in wake of the pandemic.
In 2021, health and wellness will be focused on maintaining a healthy body and mind by staying physically fit, eating a better diet and taking measures to improve emotional health. Much focus has also been placed on the environment and the effect food packaging is having. Programmes such as Blue Planet have helped drive consumer awareness, with more people now making an active effort to prevent careless waste.
Consumers will also be more cost-conscious because of economic uncertainty which will drive demand for value. However, there will still be space for premium products that provide exciting experiences to fill the void of other forms of entertainment that consumers are missing because of the pandemic, such as travel and eating at restaurants.
The main drivers of R&D within the sector can range from commercial development (such as, improving shelf life or affordability), legal changes, consumer changes based on the trends identified, ethical factors or production efficiency and scale. Below are a few examples of successful R&D claims we’ve recently submitted from the food & beverage sector:
Our client developed a new recipe using vegan alternatives to replace animal-containing ingredients such as cows’ dairy and protein used in their protein bars. The original product, a chocolate coated protein snack bar, consisted of a significant amount of dairy (50%), had a crunchy texture and silky chocolate coating on the top surface of the bar.
While developing the new vegan recipe using commercially available vegan alternatives such as oat milk, soya milk, coconut milk, rice protein etc, the client had to carefully deduce the ratio of each ingredient in the original protein bar recipe due to different flavours and water content present in these vegan alternatives. In addition, they carried out a series of iterative tests as part of their research and development work to develop the new recipe using vegan ingredients whilst achieving the same texture, consistency and flavours as the original protein bar.
Where no published recipes or guidance offered a comparable solution for a vegan protein bar, the client was able to develop suitable ingredient ratios and produce a vegan-friendly protein bar whose textures and flavours replicated the existing dairy equivalent. The activities around this development would be considered R&D for tax purposes.
Pre-packaged pasta products such as ravioli and tortellini, available at conventional supermarkets and food stores, are filled with finely blended ingredients and pasteurised during the production process. The conventional pasteurisation method affects the texture of the pasta, making it hard and dry on the outside whilst the filling inside the pasta is soft and inconsistent. As such, our client was seeking to enhance the flavours, consistency and texture of the pasta by using freshly prepared fillings and an alternative method to pasteurisation. For this reason, they conducted multiple trial-and-error experimentations to develop an alternative method that would also allow the pasta to have a shelf-life period of six months. During the development process, one of the challenges encountered was the uncertainty of whether the alternative methods could enhance the consistency and retain the flavours using different combinations of pasta filling. The activities around this development would be considered R&D for tax purposes.
In order to optimise the flavour profiles and consistency of chai tea lattes, our client set out to improve the brewing method and the ratio of spices. Chai tea lattes are conventionally brewed using a standard ratio of pre-dried spices and hot milk for a short amount of time. However, the flavour profiles and consistency of chai tea lattes are greatly dependent on the freshness of the spice mix, brewing time and method, hence, they carried out a series of iterative developments to test different ratios of fresh spices, temperature of the milk and brewing techniques. During the process, the client had to ensure that the flavour profiles were correctly balanced using an appropriate amount of fresh spices without over brewing the tea, which would cause bitterness. The activities around this development would be considered R&D for tax purposes.
The above examples highlight the way that the everyday work carried out with the sector can be interpreted based on HMRC’s definition of R&D.
With the links within innovation we’ve identified, the peripheral commercial activities such as developments around packaging, branding, and promotional materials would not constitute as R&D tax purposes.
In 2021, health and wellness will be focused on maintaining a healthy body and mind by staying physically fit, eating a better diet and taking measures to improve emotional health. Much focus has also been placed on the environment and the effect food packaging is having.
Dr Winnie Leung in the consulting team has extensive experience in the food and beverage industry, which enable her to accurately identify eligible projects undertaken by clients across the industry. Book your free consultation today to uncover qualifying projects in your business and discover how much your claim could be worth.
Dr Winnie Leung
R&D Tax Associate