Tax issues facing the Food & Drink sector – identifying tax opportunities

Category: COVID-19Food & Drink - Posted On: Apr 15 2020

In these unprecedented times, you might think that tax is the last thing to consider, but it’s not all bad and there are ways you can look for opportunities.

As proud members of Scotland Food & Drink, a key sector leader promoting the interests of Scotland, we have summarised some of the tax issues facing the sector over a few articles. In this second article, we look to identify opportunities to undertake tax planning to help you either reduce risk, look after your staff or to improve your business cash flow.

R&D Tax Credits

We know that many food and drink companies do some amazing things, but their modesty prevents them from claiming R&D tax credits. In our experience, this sector undertakes a large proportion of R&D, from researching new recipes to producing a more efficient way of achieving the optimum outcome and a claim may provide you with a much-needed tax repayment at this difficult time.

In the year past, we have delivered many claims for this sector and companies should not just assume they don’t qualify. You can find some case studies on the variety of food & drink claims we’ve delivered and what they did to qualify here.

Accounting Matters

At this time, it is entirely reasonable to make appropriate provisions for what might be difficult times ahead. For example, more aggressive provisions for bad debts might allow you to reduce your taxable profits (remember to claim your VAT back if eligible). You should also ensure that any costs incurred privately on behalf of your business are fully recharged ensuring that you do not pay tax unnecessarily on profits, or indeed on extracting those.


Many businesses look regularly at risk management, positioning of assets and protection of those and in the current climate this may be the right time to reconsider.  As asset values are under threat, this might make any tax costs of restructuring significantly lower.  This will apply to family succession matters also.  If this is relevant to you, please give one of our specialist advisors a call to discuss your own circumstances.

Employee Ownership

One of the disincentives for employee ownership is the possible tax costs. With shareholder value under pressure, now might be the right time to consider share option schemes and employee ownership trusts in order to give your valuable staff targets as we come out of lockdown. We have helped many companies set up an employee ownership trust to motivate their staff and can talk you through the options available to you.

Business Year End

The choice of year end for both unincorporated businesses and limited companies may provide some planning opportunities in the right circumstances. With a variety of different options, we would be happy to discuss whether this might work for you. Give one of our contacts below a call to discuss your circumstances.

Self Employed

For those individuals either operating as sole trades or partnerships, you’ll be aware of the government’s announcements of financial support. The calculations are not as straightforward as you might think, and we’d be happy to confirm those for you. Just get in touch with one of our specialists below.

We sincerely hope you are getting the right guidance and support as we all work through this period but if not, our team will be delighted to help you. We know tax is not your first priority but there are many opportunities to preserve cash flow in order to allow you to look after your staff and your other key assets.

To discuss your own circumstances, please get in touch with one of our EQ Food & Drink specialists, David MorrisonRoss Oliphant or Rachel Bell. If you prefer, you can call them on 01382 312100.