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 £33,350 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.
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.