After a turbulent year - how can Food and Beverage manufacturers improve their cash flow and continue to innovate?
The past 12 months have been a mixed bag for the food and drink sector: whilst in-home consumption soared in parts, out of home consumption – which typically has much higher margins – has been crippled through the closure of the hospitality industry and huge loss of preChristmas trade. Alongside this, the sector has faced disruption through Brexit and the perfect storm of issues that have created supply chain, raw material and labour issues, which the entire sector is still responding to. But as we look ahead to 2021, the alarming statistic from HMRC that despite the food and beverage industry being the largest single manufacturing sector and contributing 15.1% of GVA worth roughly £73.1 billion, only 1% of R&D claims have come from this sector over the last three years. Although Mintel did report recently that the number of Patents for immunity improving food development continues to rise. Around 97% of the UK’s Food and Beverage businesses are SMEs. For many, activities undertaken in relation to new product development and resolving technical challenges in this fast-moving sector often lead to substantial amounts of projects which could be eligible for tax rebates or cash injection via R&D tax credits. However, the figures would suggest that many claims are not yet realised. As cash flow continues to be a major concern for the 7,000+ SMEs operating in food manufacturing in the UK in 2021, how can you access important cash that could be locked away in your business? In 2020, we helped claim over 50 million in R&D reliefs for UK businesses, with the average claim at £66,000. So, if cash flow is keeping you up at night, what can you do to ease the burden, build reserves back up and ensure your business is in the best possible position to take advantage of the Government support that is available to you? Innovation in food and drink Few industries innovate on the same scale as food and drink. Innovation is basically a way of life for food manufacturers. The need to anticipate and respond to consumer tastes and trends, to adapt to legislation, to find new ways to make processes more efficient, to make products healthier or use new, more sustainable ingredients, the reduction of meat content, the rise of veganism, removing common allergens… all this activity might be ‘day-to-day’ activity to you but it could qualify for generous tax relief. This is where the challenge of making a successful, comprehensive R&D relief claim comes in, and where it’s best to seek expert advice to ensure that you capture all qualifying activity and maximise the value of your claim. Haines Watts has years of experience in analysing activity and making sure that claims are maximised. A successful claim could lead to an actual cash injection for your business that could be used in whatever way you want: you could reinvest it in further innovation, or it could just go straight back into the business as working capital. Regardless of where your business sits in the food and drink supply chain, we can help to identify the scale of innovation taking place at your company and help you to submit a qualifying claim. Never made an R&D claim before? That doesn’t matter Even if you’re new to R&D relief claims, it doesn’t matter: thousands of first-time R&D relief claims are made every year and we can look back retrospectively over two years for qualifying activity. You could be sitting on more trapped cash than you realise, so why not speak to our advisors today who will be happy to explain our processes and give you a free estimate of what your claim could be worth. It could be the best half-hour phone call you’ve ever made.
