Regular activties such as researching a new dish, a new menu or a new concept could qualify, and HMRC is seeking to reward this type of innovation through R&D tax credits.
So whilst there may be no white lab coat in sight; many restaurants may be eligible to claim R&D tax credits and in this post we look at how you might take advantage of R&D tax credits.
Research and development tax credits for a restaurant
What qualifies as research?
R&D tax credits are available for any company who can show it is researching and introducing innovative products, procedures or systems.
In the restaurant industry, trial and error could include taste testing a new recipe or menu. In Sat Bain’s case, R&D tax credit was secured because of the experimenting and innovating conducted in his development kitchen.
What expenses qualify?
The expenses that generate the credit could include staff costs (wages, pensions and training), materials, utilities (electricity and heating), outsourced research and testing.
Wages can be allocated based on the amount of time spent conducting research. For example, if a chef works 40 hours per week and spends 4 hours per week experimenting with new food offerings, the restaurant could have 10% of his wages qualify for the credit. Supplies could include the various ingredients used or consumed during the research process.
Other sectors involved in research and development
The latest available government statistics (2011-12) show that of all R&D tax claims, the hospitality and restaurant/retail and wholesale trade accounted for almost 7% of the total claims made.
Here is how other sectors faired:
| Industry | No. of claims | % of total claims | Amount claimed (£m) | % of total amount claimed |
|---|---|---|---|---|
| Agriculture and Fishing | 40 | 0.5% | – | – |
| Mining and Quarrying | 55 | 0.6% | 25 | 2.5% |
| Manufacturing | 3450 | 39.5% | 395 | 38.7% |
| Distribution of gas, electricity and water | 45 | 0.5% | 15 | 1.5% |
| Construction | 210 | 2.4% | 15 | 1.5% |
| Wholesale & retail trade, Hotels and Restaurants | 600 | 6.9% | 25 | 2.5% |
| Transport, storage and communication | 170 | 1.9% | 10 | 1.0% |
| Financial intermediation | 55 | 0.6% | 20 | 2.0% |
| Business services | 3655 | 41.9% | 450 | 44.1% |
| Public administration and defence | 10 | 0.1% | 20 | 2.0% |
| Education Health and social work | 105 | 1.2% | 10 | 1.0% |
| Other | 335 | 3.8% | 35 | 3.4% |
| Total | 8730 | 1020 |
Source: HMRC, Research and Development Tax Credits Statistics 2011-12, Published August 2013
Contact us
At Rouse Partners we are a west of London based firm of chartered accountants and tax advisors who, to date, have secured clients a massive £3.8m worth of tax credits under the Research and Development Tax Credit schemes.
If you are currently undertaking any product or service development, please contact our experienced tax team for a free, no obligation discussion on your eligibility to claim.
With more than 20 years in tax, Paul provides tax compliance and advisory services to clients, and specialises in R&D and capital allowance claims.