Specialist hospitality accountancy firm, Jeffreys Henry LLP, has successfully claimed over £180,000 in research and development (R&D) tax relief for a multi-site restaurant client.
A site visit of the restaurant and subsequent conversations with the head chef and key employees revealed a number of innovative projects that qualifies for R&D tax relief but were previously overlooked.
The firms’ R&D tax team, led by Parminder Chattha, prepared a comprehensive technical and financial report to justify the R&D elements of these projects which resulted in over £180,000 in R&D tax relief, received as a cash payment from HMRC.
Introduced by the UK Government in 2000, R&D tax relief is a key part of the government’s strategy to support innovation in the UK by allowing companies to reclaim a generous proportion of money they have spent on developing a new product, or improving an existing product, service or process.
However, despite the benefits, research carried out by accountancy firm, Jeffreys Henry, found that less than 1% of claims for R&D tax relief received in the 2014/2015 tax year were submitted by the hospitality industry. Tax experts at the firm believe the reason for this is that many businesses don’t understand what constitutes qualifying R&D activity and have the perception that the rules for making a claim are onerous.
Parminder Chattha, R&D Tax Partner at Jeffreys Henry, commented: “Any restaurant, bar or hotel can qualify for R&D tax relief as long as they spend money on developing a new, or improving an existing product, service or process that constitutes an ‘advance’ in science and technology.”
“That ‘advance’ doesn’t have to be cutting edge,” he added. “It could mean replicating a well-known dish where the recipe is a trade secret; making an existing product taste the same, but with lower sugar
or salt content; creating a new range of vegan pizzas; or even developing a range of plant-based cocktails.”
In the case of the aforementioned restaurant chain, tax relief was successfully claimed for a number of initiatives, including developing a thinner, more pliable and elastic tortilla product and developing a new low calorie vegan menu.
While loss-making companies can claim a cash refund of £33,000 for every £100,000 they spend on qualifying R&D expenditure, including staff costs (wages, pensions and training), materials, utility bills, and outsourced research/testing, profit-making companies can also benefit by reducing their corporation tax bill through a 230% enhanced tax deduction. Staff costs can be allocated based on the amount of time spent conducting research. For example, if a chef works 40 hours per week and spends four of those hours experimenting with new food offerings, the restaurant could have 10% of his wages qualify for the relief. Qualifying supplies could include the ingredients used or consumed during the research process.
However, Mr Chatta also pointed out that the timing of making a claim is very important, because claims for R&D tax relief can only be backdated by a maximum of two accounting periods.
A spokesperson for the restaurant chain welcomed the news saying: “We were unaware that there was a research and development tax relief that could be applied to restaurants. It was good to know a specialist like Jeffreys Henry were there to help, as it’s quite a technical and convoluted process. It’s certainly something I’d encourage other innovative restaurant operators to look into.”
Jeffreys Henry is one of the UK’s top 100 firms of chartered accountants and tax advisers with a specialist restaurant and hospitality team. Our specialist knowledge means we can identify valid R&D projects within the food and beverage industry that others have missed.
Other recent R&D claims include: £250,000 for a celebrity chef with over 6 restaurants and delis, £96,000 for a premium Kosher caterer and £70,000 for a multi-site vegetarian restaurant group.
For further information about Jeffreys Henry or R&D tax relief, please contact: