Date15 Dec 2020
CategoryR&D Tax Incentives, Tax
The UK is no stranger to innovation in the agriculture industry, having led the agricultural revolution of the 18th century. The UK has been at the forefront of farming practices and equipment development, including the introduction of crop rotations and horse-drawn seed presses to other parts of the world. We are also leaders when it comes to agricultural output; over 70% of land in the UK is used for agriculture, an industry valued at £26 billion, representing over 7% of Europe’s total agriculture market.
Agri-Tech refers to the development and application of technology and technological innovation to improve the efficiency and output of agriculture. It boosts the efficiency of production, increases crop yield and drives profits in the sector. Technology and data can create opportunities and help solve problems with production, traceability, and the preservation of scarce natural resources. Despite its traditional image, agriculture is adopting new mechanical and robotic innovations, cloud utilisation, big data, and web-based solutions, to mention just a few, to increase productivity while protecting our environment.
HMRC’s R&D Tax Credit Scheme enables innovative SME’s to access tax relief and cash credits to further invest in their research, or indeed help fund working capital. To qualify for R&D Tax Relief a project must seek to make an appreciable improvement in its field in order to resolve a ‘scientific or technological uncertainty’. The tax relief can be worth up to 33% of the amounts invested in R&D.
Azets is a one of the UK’s leading advisors to the agricultural sector and we see growing opportunities for our farming and agricultural-based clients to take advantage of the tax relief as new technologies evolve. Tim Croft, Head of R&D for Azets said:
“Farming and the agricultural sector is at the heart of what the R&D Tax Relief legislation was designed for. Investment and innovation in Agri-Tech is so important in a world that is increasingly reliant on technology and smart solutions, and those who don’t adapt may find themselves left behind. I would urge any businesses in the sector developing new concepts and processes, or seeking to improve upon existing technologies, to come and speak to us”.
Some areas in which our R&D teams have seen innovation being undertaken include:
Continual analysis and monitoring of conditions on the farmland, using real-time data, enables farmers to make swift and proactive decisions. Sensor technology is evolving to enable variables such as water, light, humidity, moisture and soil acidity to be kept under constant review. Animal farming continues to make better use of microchips to monitor behaviours of livestock.
Data analytical techniques are utilised by specialist software, combining empirical data with live information to enable farmers to make optimal decisions, drive efficiencies and reduce wastage and crop disease.
Robotics and AI
Agribots are already used by farmers to take over many manual tasks, reducing physical effort, enabling crucial savings in labour costs and precision timing of tasks which would otherwise rely on human intervention. This may include the nourishment and harvesting of crops, or indeed self-driving tractors and machinery. Machinery can be programmed and “trained” using Artificial Intelligence to repeat tasks and learn from failures.
Ever improving drone technology can be deployed for many purposes, such as early identification of crop disease, enabling farmers to take swift remedial action to save the farm significant financial loss. Use of GPS technology is increasingly utilised to ensure maximum efficiencies in the routing of machinery and resulting in reduced fuel wastage and crop damage.
Land is an increasingly scarce resource, and a big area of Agri-Tech is Vertical Farming, the practice of growing crops in vertically stacked layers. It frequently incorporates controlled-environment agriculture, which aims to optimise plant growth, and soilless farming techniques such as hydroponics, aquaponics and aeroponics.
Common choices of structures to house vertical farming systems include buildings, shipping containers, tunnels, and abandoned mine shafts. The process works particularly well in urban environments, using only a fraction of the water required in a field, utilising LED lights and enabling easy transportation of food and other consumables.
Understanding the opportunities
The agriculture sector has been at the forefront of the development of new technologies, processes and machinery. However it has become clear that the industry is not obtaining maximum benefit from Research and Development Tax Credits.
The latest set of HMRC statistics, published in September 2020, show that the agriculture sector is only responsible for 1% of R&D claims, with 620 annual claims being made, representing £30m of tax relief in total - an average of £48,300 tax value per claim. Across all sectors there were 59,000 claims at an average of £89,700 tax value.
This is in the context of a sector which contributes £10.4 billion to the UK’s economy (in Gross Value Added) and employs over 475,000 people.
We believe that R&D tax relief is significantly underpromoted within the agriculture community, in particular Agri-Tech, and there are significant untapped opportunities.
If you have queries about R&D claims or the content of this article, please get in touch with your usual Azets advisor.