Two valuable tax reliefs critical to the food & drink sector

Many in the food and drink sector could be missing out on valuable tax reliefs, which can be used to reinvest back into the business and ensure Scotland’s food and drink industry remains at the forefront of innovation, renowned for its high quality produce worldwide.

R&D tax credits and capital allowances are just two examples of valuable tax reliefs that innovative companies are entitled to claim. We explore both below, with some examples of what food and drink businesses are currently making successful claims for.

R&D tax credits

We act for many diverse companies in the food and drink sector and have helped them to successfully claim R&D so they can reinvest the savings back into the business. A few recent examples of R&D claims include:

• A fish and chip shop successfully developing a low-fat method of cooking fish
• A fresh vegetable producer researching methods of growing, cutting, packing, and cooking vegetables for the mass market
• Two different producers researching healthy crisp options
• A ready meal producer seeking to lower the salt content of its products
• A packaging company investigating alternatives to plastics
• A fresh fish supplier determining safer and more environmentally friendly ways of catching fish
• A gin producer introducing new flavours to its product range

In the year to 31 March 2021, we delivered 18 claims for the food & drink sector with resulting tax savings of over £950,000, an average claim per company of over £50,000. Scotland has such a high quality of business in this sector that we believe there are many R&D projects not being claimed for by eligible companies. We would be delighted to help determine whether you might have a claim – and are happy to offer our advice on a no-obligation basis should it be decided not to proceed with a claim. This is not a time to be modest, but rather to be proud of the quality of product/service that your company produces.

Capital allowances

In the Budget on 3 March 2021, the grandly titled ‘super-deduction’ for capital allowances was introduced for a two-year period from 1 April 2021 to 31 March 2023. Essentially, for qualifying plant and machinery, a £100,000 investment can be eligible for £130,000 of tax relief. We know that the food and drink sector is often very capital intensive, requiring extensive investment into production and dispatch processes. Now may be the time to make the investments that will form the platform for your company’s growth in the coming years as Scotland seeks to surge economically. We are happy to offer our support or provide a second opinion on the most tax efficient forms of investment for your business.

Neither of the above tax reliefs are in any way aggressive tax planning, rather they are claims to which eligible businesses are entitled. Anecdotally, Scottish businesses are more reluctant to make these sorts of claims and we urge the food & drink sector to use the rules to their advantage as it seeks to expand and innovate.

If you would like to discuss anything we’ve highlighted, you can get in touch with our EQ Food & Drink specialists by calling one of our offices or emailing foodanddrink@eqaccountants.co.uk.