Most food firms not taking up R&D credits
ONLY A minority of Irish food and drink companies are utilising the research and development tax credits available to them, according to a report by Grant Thornton.
A survey by the accountants and business advisers found that 70 per cent of members of food organisation Good Food Ireland were not aware of the RD tax credits available.
In addition to the 12.5 per corporate tax rate, companies engaged in research and development are entitled to claim an additional 25 per cent tax relief on R&D work carried out.
According to Ciara Jackson, one of the authors of the report, one reason for the lack of take-up by food companies was a misconception about the kind of activity that qualifies as R&D.
“There is a perception that it relates only to technicians in white coats. In reality it is much wider than this. Companies have to show that they have resolved previous unresolvable problems or have made some kind of technical advancement.”
This could include changes to product ingredients made by producers who want to break into new markets, or process improvements to product lines such as innovative alterations in packaging which enhance the product.
Recent budgetary changes have also made the R&D tax credit more attractive as companies can receive the tax credit as a direct cash rebate subject to certain conditions, rather than as a write-off against their corporate tax liability, making it more attractive to non-profitable companies.
R&D activity that does not ultimately generate the required results also qualifies for the tax credit. However, the credit does not apply to individuals or sole traders.
“The tax savings can run into the millions, so in some cases it may even be worth incorporating the business,” says Ciara Jackson.