R&D Tax Credits: The forgotten funding for agriculture – and you may be missing out…

A slight glazing of the eyes, perhaps even a yawn, and most definitely an attention switch being turned off somewhere.

The problem is, most farmers, growers and just about anyone else involved in agriculture have never been told that what they do in their day-to-day working lives may well be considered, by HMRC at least, as R&D – hence the vacant facial expression when the subject arises.

I was recently introduced to three farmers who each had small-medium sized businesses in the East of England. Despite all having heard of the R&D tax credit scheme, they had never done a claim. Their accountants had had the same understanding as they did – that this scheme must be purely for software engineers in London and pharmaceutical manufacturers in their laboratories. Not for someone riding a tractor in a field in rural England.

There is a pervading attitude of ‘playing it safe’ when it comes to the finances of an agricultural business, which for the most part, is a good thing.

But when it comes to R&D, ‘playing it safe’ almost always means ignoring the whole thing entirely, and never even attempting to understand how it may apply to a business.

R&D credits are an entitlement, not an application. It’s not grant funding which you need to put together a proposal for, potentially wasting 10’s or 100’s of hours on only to not be selected or approved.

Effectively, it is a debt owed from the Government to your business, or (as the name suggests) a tax credit which reduces your Corporation Tax liability. Most often, you’ll see it as a cash repayment directly to you. 
Back to our 3 farmers…

All of them were doing R&D, in different forms, but each had considered what they did to be ‘farming as usual’.

One had been doing crop trials, another had worked on ways to combat a particular weed, and the third had made inroads into sustainability processes across their farm.

None of this was the major developmental work that R&D is often perceived to entail, and furthermore, work does not have to be successful to qualify. In agriculture, it is gradual, appreciable improvements made in knowledge and understanding that are the key to ‘levelling up’ (to quote a politician or two) the food production processes and practices that we all increasingly rely on.

They get to claim back anything from 25-33% of their qualifying expenditure, which amounted to £30k, £50k, and £95k respectively for their first claims. 
Yes, their first claims. As long as they are doing R&D, they will continue to make claims every financial year. 

Well, it could be nothing. Maybe none of the work you’ve done in the last few years qualifies. But if it does, there could be a fair bit of tax that HMRC owes back to you, just waiting to be claimed.

Ask an expert, speak to your peers, and you’ll probably find that somebody can help.

It could be a VERY rewarding conversation.