At the heart of it, R&D for tax purposes needs to satisfy two core tests:
R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology, for example:
The art of agriculture has been handed down through the ages and it is now beginning to embrace fully the opportunities of technology and how it can improve the sector for all involved.
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There are five broad categories which can classify Agricultural R&D claims; staff costs, subcontractors, externally provided works (EPWs), consumables e.g. heat, light and power. We’ve included more detail on each of these and how it’s included in your claim below.
The majority of most R&D tax relief claims are based around staff costs. This includes people directly involved with the activity and others who are indirectly involved.
An example of direct costs would be a specific solutions architect – they tend to be defined, technical roles who are the doers of the project. A common misconception is they have to be scientists and academics, this is incorrect. If they are directly contributing to the R&D effort, then there is a good chance their costs can be included.
Indirect staff are people who are also involved in supporting the R&D project such as administration, finance, and personnel activities where they enable the R&D to happen. These costs are usually overlooked but have a rightful place in the claim.
Where you may not have the expertise in house, you may rely on a third party to help with part of the R&D process. These costs are qualifying expenses for the R&D tax relief scheme. For overseas subcontractor costs new rules apply for accounting periods starting on or after 1 April 2024.
Like subcontractors, you may not have directly employed staff but want to have resource for a particular role who act in the same way as employees – i.e. under your care custody and control. These costs can form part of the claim. For overseas EPW’s costs new rules apply for accounting periods starting on or after 1 April 2024.
The proportion of heat, light and power that is used for the R&D project is also qualifying expenditure.
Any software used directly in the R&D is a qualifying cost. For accounting periods on or after 1 April 2023 costs related to datasets and cloud computing can also be claimed.
The SME and RDEC schemes will merge into a single scheme for accounting periods starting on or after 1 April 2024.
With the SME R&D tax credit scheme you can currently claim tax relief of up to 33% on your qualifying R&D expenditure incurred up to 31 March 2023. After this new rates will apply.
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The Research and Development Expenditure Credit (RDEC) rate has increased over the years, companies can get over 10% of their R&D expenditure incurred up to 31 March 2023 refunded. Then this will increase up to 15%.
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Our client wanted to find a way to limit the spread of infection in the milking process and at the same time speed up the end to end process.
From amending products in the market, they continued to test small changes in the mechanisms until they found a way that gave them what they wanted. This process took just over 18 months and the costs associated were picked up and a successful R&D claim made.
Our client processed tonnes of seeds every year. They worked on cleaning the kernels more effectively on the production line.
They set up a test belt where they kept trying different speeds, different suppliers, cleaning equipment – all the variables that they needed to operate the line. Through this ongoing process they continue to refine their product to create efficiency in the process and increased quality output. For three consecutive years, this client has made a claim and continues to benefit from the R&D tax relief scheme.
