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Research and Development Tax Credits in Agriculture

by Adam Park | October 12, 2020

Research & Development in agriculture? Some of you may be thinking that doesn’t make sense – R&D happens in laboratories, with pipettes and cylindrical flasks. Well, that is true, but in fact, R&D also happens on farms every day all around the UK. And importantly – many farmers may not be aware that what they’re doing qualifies as R&D. That means if their business is a limited company they may be missing out on the tax credit scheme available to reduce their corporation tax liability, or even lead to a payable cash sum.


For those that do claim – these incentives can make a big difference. The returns can be as high as 33% of the amount spent on the R&D. In 2016/17, the most recent year for which we have the full data[1], the average saving or tax-credit for a SME R&D Tax Credit claim in Agriculture, Forestry or Fishing was £42,000. That’s money that HMRC wants innovative UK companies to claim.


But if you are still not convinced that R&D takes place within agriculture – lets me talk through the definition of R&D from HMRC’s perspective and point out some of the big potential opportunities.

Defining R&D in Agriculture

R&D expenditure can include any money spent enhancing or developing new products, processes, or services. In the context of agriculture – this could be work undertaken to increase the yield or quality of certain crops or livestock or even create conditions in which a new product is able to thrive where it hasn’t been viable before.

However, it is not quite as simple as that, there are 2 criteria that need to be met for the work to be considered R&D – lets walk through these in the context of agriculture.

1. Uncertainty in Agriculture

There needs to be an uncertainty that needed to be resolved to reach the desired outcome. That means when developing a new product, process, or service – there needs to have been some issues, questions, or puzzles that were dealt with along the way. Moreover, these uncertainties must not have been readily resolvable by a short conversation with a competent professional.


As an example – if a farm was having an issue with an outbreak of disease, and a competent disease and pest control specialist was able to recommend a viable treatment, this will not classify as R&D. However, if there was no readily available resolution and different possibilities were examined to resolve this uncertainty with any degree of success, this may well qualify as R&D. Let us move on to the next test.

2. Scientific or Technological Advance in Agriculture

The resolution of or attempts to resolve the uncertainty must have led to an appreciable advance in scientific or technical knowledge. If you’re working with any unusual livestock breeds, plants, feeds, pesticides, energy capture systems or even if you’re generally trying to make improvements to your business and you’re unsure what the outcome will be – this test may well be met.


Areas of technical knowledge related to agriculture include agronomy, nutrition, propagation and breeding, disease and pest control, energy efficiency, automation, drone and gps technologies, storage, and processing. So hopefully you can see – there’s a lot of room for potential R&D projects here.

Can you Claim for your Agricultural R&D?

If you’ve undertaken work to enhance or develop new products, processes, or services and the criteria around uncertainty and scientific or technological advances were met – you have been conducting R&D. There are a few conditions – such as the work needs to have been conducted by a British limited company. Even if the work took place up to 3 years ago, you may still be able to claim for it, as long as it is no more than two years since the end of the accounting period in which the work took place.

If you think you might have a claim, or even if you have some work you’ve done that you want to discuss – we’re here to help. Agriculture is one of the areas that Zest specialise in, and we’ll meet with you to discuss your claim free of charge with no obligations to proceed with us.

So, what are you waiting for?

References

[1] Research and Development Tax Credit Statistics (October 2019): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/837282/Research_and_Development_Tax_Credits_Statistics_October_2019.pdf

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