Like many other businesses in the food and drink industry, alcohol manufacturers may have cause to benefit from HMRC’s R&D tax relief incentive. This article explains everything you need to know…
R&D tax relief is a statutory tax relief scheme implemented by HMRC. Businesses that can prove that they have spent money on certain ‘qualifying costs’ in the course of research and development can obtain a reduction on their annual corporation tax bill.
HMRC has a very specific definition of what counts as R&D. The project must overcome technical uncertainty to advance knowledge in its field. The element of uncertainty is important, and the solution cannot be easily deductible by a competent professional. You can find out more about HMRC’s definition of R&D here.
The qualifying costs that businesses can claim for are specific, too. These must be expenses accrued during R&D, and can include:
To make an R&D tax relief claim, brewers and distillers must be able to prove exactly how much was spent on the above categories and prove timescales for the project.
How much R&D relief a business is eligible for depends on its qualifying R&D spend and company size.
R&D happens as part of projects conducted by normal businesses, breweries and distillers are always on the lookout for ways to make their products better for their customers. Whenever this happens, there will usually be a period of research and development at the start of the project lifecycle. For example, before a business can start distilling a new variety of whisky, there will necessarily be a period of planning, research, and testing. If this research and development helps a company advance a new area of knowledge in its field, this falls under HMRC’s definition of R&D.
Due to the strict industry regulation that alcohol manufacturers face, brewers and distillers often think they’re not eligible for R&D tax relief. However, we’re pleased to say that this isn’t the case.
Businesses from any sector can apply for R&D tax relief as long as they pay UK corporation tax, and the work meets HMRC’s definition of research and development. This is because R&D is judged on a project-by-project basis, not on a business-by-business basis. This also means that not all a company’s work will involve R&D. An experienced R&D tax relief consultancy will be able to provide clear advice on what projects are covered, and what’s not.
R&D tax relief exists to reward businesses for spending money on research and development. It’s a risky business and it doesn’t always result in a successful outcome. Projects may be delayed, or fail totally, costing the business money.
HMRC uses R&D tax relief to reward businesses for taking this risk, and to encourage them to keep doing it. No matter what the sector, R&D and innovation are good for the economy, which is why HMRC wants businesses to do more of it.
When it comes to R&D activity relevant to brewers and distillers, the scope is broad enough to encompass many potential projects.
Here are some examples of the types of R&D projects that may be undertaken by brewers and distillers:
Even though R&D tax relief is technically a form of tax self-assessment, businesses rarely do it this way. Most choose to work with an experienced R&D consultant who can advise and support them through the process.
Although other R&D tax relief firms may have their own way of doing things, here’s how we do it at Wilby Jones Consulting:
Want to find out more about how your brewery or distilling business could benefit from R&D tax relief?
Get in touch to discuss your projects in more detail.