Tax Relief for Food and Beverage Businesses

Innovation Funding Tax Relief for Food and Beverage Businesses

The food and drink sector in the UK is thriving. From agri-food and food and drink manufacturing to food and beverage retailing and catering, the industry certainly provides food for thought. 

According to the Food and Drink Federation (FDF), the industry’s total turnover in 2022 was £128 billion. The food and drink industry is the biggest UK manufacturing sector – larger than automotive and aerospace combined. 

Statistics from the Department for Environment Food & Rural Affairs (DEFRA) revealed that, in 2022, there were 8,285 SMEs in the food and drink manufacturing sector, with a turnover of approximately £22 billion.  

The latest trends in the food and beverage industry include a shift towards consumers opting for low or no alcohol drinks, cold brew coffee, healthier and more sustainable eating, and DIY subscription meal kits (which increased in popularity during the COVID-19 pandemic). 

Each of these presents opportunities for innovation and research and development (R&D), bringing the potential for R&D tax incentives from HM Revenue and Customs (HMRC). 

Demonstrating adaptability and resilience in recent years, the food and drink industry is well-versed in overcoming challenges. 

R&D in the Food and Beverage Industry

Innovation in this industry tends to arise in developing new food products and improving or amending production processes during food manufacturing. 

R&D tax credits are a welcome financial boost for food and beverage innovation, providing companies with a cash injection or corporation tax deduction for qualifying R&D projects. This tax incentive is a valuable source of funding for food and drink businesses, assisting with future business growth and enabling innovation funding. The good news is that even if projects aren’t successful, an attempt to seek an advance in the industry qualifies as R&D, and in the food and beverage industry, there is an abundance of trial and error involved, particularly when it comes to adapting recipes and trialling new processes. 

R&D and innovation are greatly involved in the farm-to-fork strategy too, whereby food and beverage businesses and agricultural businesses will need to cut down on food loss and waste, create healthier, local, and more sustainable foods, and reduce the environmental impact of food production. 

Here are some examples of R&D in the food industry:

  • Adapting a recipe for “free from” ranges

  • Automating or optimising processing or packaging systems

  • Creating new methods to more sustainably package and transport a product

  • Creating vegan, gluten-free, sugar-free, or other versions of existing products

  • Developing or improving software to help manage operations

  • Experimenting with new equipment or methods

  • Food and drink product development – developing new products or improving existing products

  • Improving efficiency of a food manufacturing process

  • Improving nutritional value of food; for example, removing bad fats or increasing protein, whilst retaining product taste

  • Improving the shelf life or preservation of food/drink

  • Improving the texture or taste of food

  • Managing environmental factors, such as temperature

  • Revising recipes to meet new standards or consumer demands

    How Can You Fund R&D in the Food and Drink Industry?

    On the UK’s path to becoming net zero, the food and drink industry is under pressure to source and use sustainable ingredients, think about the longer-term impact of their work, and reduce waste, whilst maintaining the taste and quality of their products. 

    Food and drink businesses, particularly manufacturers, strive to meet these demands, and they do so through innovation. 

    There are various forms of innovation funding available to enable food and drink R&D to take place, including grant funding and tax relief.  

    Grants, usually nonrepayable, are awarded by funding bodies prior to any innovation taking place, whilst tax relief is a retrospective incentive claimable after the accounting period in which the R&D took place.  

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    Grant Funding

    Any business that’s investing time and resources into innovative R&D in the UK can apply for and access UK/EU grant funding. There are various funding bodies, such as Innovate UK and the European Innovation Council, which provide funding competitions for businesses to access funding to innovate and grow.
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    The Patent Box

    The Patent Box is a government tax relief scheme that rewards companies for investing in innovation. If a company is making a profit on patented inventions, it’s eligible for a lower effective corporation tax rate of 10% on relevant profits. What’s more, if a company is eligible for the Patent Box tax relief regime, it’s likely that it’s also eligible for R&D tax relief.
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    R&D Tax Relief

    HM Revenue and Customs’ (HMRC’s) R&D tax relief scheme rewards businesses that are seeking an advance within their industry. R&D tax credits can be claimed by businesses that are developing new systems, products, or processes or modifying existing ones, which in turn create a scientific or technological advancement.

    Your Innovation Funding Partner

    Are you a trailblazer in the world of culinary creativity and beverage brilliance? Ryan’s tax specialists will elevate your food and beverage innovations, supporting you in achieving grant funding or tax relief for your efforts.

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