Why aren’t Agriculture companies claiming R&D Tax Credits?
In broad terms, we have come across three main reasons why companies in the agriculture sector are not claiming their R&D tax credits:
• They don’t realise the scheme exists
This is a large problem across a lot of sectors, particularly with SMEs. HMRC have recently started to pick up on this and there are plans to publicise the scheme more.
• There is an assumption that it only applies to science and technology companies
Not true; R&D Tax Credits are open to all industries. It’s simply a case of understanding where a company’s innovations meet with the R&D Tax Credit criteria.
In the UK, there is the opportunity for farmers to take advantage of HMRC’s R&D tax credit schemes in order to claim back money to further invest in their research. The HMRC test for genuine R&D is whether an ‘appreciable improvement’ has been found, addressing a ‘scientific or technological uncertainty’.
According to Farming news website Farming UK, an upward trend in R&D Tax Credit claims from within the agricultural sector is starting to take place, with an increase of nearly 30% in the number of claims since 2015. So, whilst it’s all moving in the right direction, there are still many agricultural businesses that are not currently benefiting from the R&D Tax Credits they are entitled to.
• What is agri-tech?
The Agri-Tech sector is where technology is being utilised to provide solutions to problems in agriculture, farming, and food production and distribution. Scientists, technologists, and engineers are joining forces with a whole range of start-ups and more established companies to focus on agriculture innovation.
Agritech is a great example of the kind of work that would entitle companies in this sector to claim R&D Tax Credits. Agritech involves using the latest technology to boost the efficiency of production, increase yield and ultimately drive profits within agriculture, and horticulture in particular. It focusses on developing technology, rather than using more land, to meet the growing needs of the world’s economy.
What types of things count as R&D in the agricultural sector?
Companies may be carrying out innovative projects that would qualify for R&D Tax Credits in things that are being applied to solve problems and make farming processes appreciably better, often by improving efficiency with greater yields for less input.
Problems to be solved:
• Feeding a growing global population
• Limited resources & increasing pressure on natural resources
• Environmental threats and resilience including disease and disaster
• Reducing energy use • Waste – in harvest, storage, and food – and what to do with it
Where the R&D occurs:
• New technologies & processes – develop, adopt, and exploit new processes in Agricultural Innovation
• Robotics & AI
• Monitoring, satellite imagery & remote sensing • Increasing yields – including crops
• Improving labour productivity through robotics and machines
• Resource management
• Soil management & smart irrigation
• Vertical farms
The focus is on increasing productivity through technology and data rather than developing more land for agricultural use. In response, the UK government is investing £160 million into its Agri-Tech strategy to put the UK firmly at the centre of the Agri-Tech revolution