How can R&D relief help agricultural businesses?

Research and Development (R&D) tax relief has attracted a lot of media interest in recent years – much of it due to the abuse of the scheme. The relief still delivers significant value, but renewed focus on compliance from HMRC means businesses, including those in agriculture, should ensure they have a robust approach to identifying where R&D activity may be taking place. 

There are many problems and challenges facing UK agriculture, but the good news is that the work to resolve some of these can qualify for R&D tax relief. Economic, environmental and commercial factors are often triggers for technological innovation. This is true across a range of issues.  

• Labour shortages: The agricultural sector faces a persistent shortage of workers, particularly in seasonal and specialised roles. This has been exacerbated by Brexit and the difficulties with attracting and funding domestic workers to the industry. Improving labour productivity through robotics, machinery and innovative methods has potential to attract R&D relief   
• Climate change: Climate change, including associated extreme weather events such as droughts, floods and heatwaves that affect crop yields and livestock management, impacts agricultural productivity. Solutions for combating climate change, proofing against environmental threats and enhancing resilience against disease can attract relief, provided they involve technology or science   
• Rising input costs: The cost of essential farm inputs like fuel, fertiliser, pesticides and equipment has increased, impacting farm profitability. Cost-saving methods aiming  to develop alternatives to traditional fuels, pesticides and chemicals can attract relief
• Environmental sustainability: The UK faces challenges in balancing agricultural production with environmental objectives. Developing methods to meet regulatory goals to reduce emissions while increasing or even maintaining production can qualify for the relief
• Quality and animal welfare: This is not a new challenge, but one about which there is increasing awareness and visibility. Experimentation with animal nutrition to improve animal welfare, breeding ability or product quality is another potential qualifying area  
• Soil Degradation: Unsustainable agricultural practices, including monoculture and chemical use, have led to soil degradation, affecting crop production and environmental sustainability. Finding better methods of soil management, improving soil health and mitigating water pollution can qualify

Moreover, developing or contributing to studies involving the development of biotechnology and agricultural technology (agritech) is at the forefront of agricultural development. Precision agriculture, developing novel GPS and drone technologies and new data analytics-driven approaches to optimise resource use and maximise crop production efficiency are other potential areas of R&D within the industry.   

Agricultural R&D often involves collaboration between universities and research institutions.  These collaborations can facilitate knowledge exchange and accelerate the development of new technologies and practices. Where trading companies are collaborating with academic institutions on scientific studies, R&D tax relief may be available on the company’s contribution. 

In 2024, the two R&D schemes, SME and RDEC, were replaced by a merged R&D scheme. This means most trading companies subject to corporation tax undertaking qualifying research and development can claim a taxable expenditure credit of 20% of their qualifying expenditure, subject to some conditions.   

For loss-making R&D intensive SME companies, there may be the option to claim relief under the enhanced R&D intensive support scheme (ERIS). This allows an additional deduction to profits of 86% of qualifying R&D expenditure and a claimable R&D tax credit of 14.5% of their surrenderable loss (similar to the old SME scheme).   

We have a large national team of R&D tax specialists (including industry experienced engineers and ex-HMRC R&D specialists) who can prepare and submit your R&D claims, or support your team to understand what activities might qualify for relief and how to access it.  

We will get to know your business, and our approach is designed to spot qualifying R&D areas that you may not have considered previously. Our team has an excellent track record of preparing robust and maximised R&D claims.  

Please get in touch with your usual contact or any of the contacts listed if you would like to discuss this further. 

Approval code: NTEH7032611