Sowing the seeds of innovation – with tax relief

Following the widespread rejection of the idea of a new statutory, industry wide, levy scheme for farmers and agri-companies – one option for progressing research and development projects is for businesses to fund their own – and benefit from generous tax relief.

07 September 2021

Innovation Funding Consultant at ABGI, Kevin Bailey, explained: “Whilst access to finance can present ongoing challenges for the industry, HMRC’s R and D tax relief scheme actively encourages farmers and agri-companies to engage in technological innovation that can bring huge benefits to the sector. To date, very few agricultural businesses have taken up the scheme."

Since HMRC launched its R and D tax credit scheme, more than 300,000 claims have been made, resulting in £33.3bn in tax relief awarded to business of all shapes and sizes. In the latest tax year alone, there were around 60,000 R and D tax relief claims, but less than 100 of these were from agricultural, forestry and fishery businesses.

Mr Bailey said: “The R and D delivered through statutory schemes and industry bodies that is supported by the levy is not one of the qualifying categories of expenditure under the scheme. It would not amount to a consumable cost, and a levy payment would not meet the requirements of a qualifying payment to a subcontractor for R and D activities. However, businesses that fund their own R and D activities will find that many projects are eligible to claim substantial tax relief."

As an example, ABGI highlighted the Shropshire Petals business, which grows a wide range of sustainable petal confetti and dried flowers on a fourth-generation, Shropshire family farm, delivering to customers worldwide. Over the past four years, the business has benefitted from the R and D tax relief scheme. Director Michael Bubb said: “We grow flowers at field scale, and aim to find the most economical way to bring our products to the wedding market. The tax relief scheme has benefited us hugely. We are on a continual programme of innovation, always looking at ways to improve our mechanisation and harvesting methods, so the whole process ensures the senior management team is thinking carefully – in a logical and meaningful way, that is properly documented. The extra cash flow enables us to really think more deeply about our business and what we are aiming to achieve.”

Article originally published on The Scottish Farmer

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