The UK budget contains some positive news for the Food and Drink Sector.
Annual Investment Allowance
An important Budget announcement for the Food and Drink sector is the extension and doubling of the capital allowances Annual Investment Allowance (AIA). This incentive currently allows businesses to claim 100% upfront tax deductions for the cost of plant & machinery expenditure up to an annual amount of £250,000. The incentive was due to expire on 31 December 2014, but has been extended to 31 December 2015 and increased to £500,000.
Capital expenditure on plant & machinery can be a significant part of the cost base for businesses in the Food and Drink sector and so the extension and increase of the AIA will be welcome. Businesses with upcoming capital expenditure requirements should be considering whether to accelerate anticipated expenditure programs to benefit from this temporary but valuable incentive.
R&D tax credits
Another important announcement for smaller or developing businesses in the Food and Drink sector is the increase in the repayable R&D tax credit from 11% to 14.5%. Small and medium-sized businesses can obtain an enhanced tax deductions for R&D expenditure (currently 225% of qualifying expenditure). For businesses that do not make profits against which these enhanced deductions can be used (for example, businesses in a start-up or development phase), these deductions can effectively be “cashed-in” in return for a payment from HMRC. This payable credit is a valuable source of extra funding for businesses undertaking R&D activity.
The Budget has increased the payable credit from 11% of R&D expenditure to 14.5%, increasing the value of the payable credit to relevant businesses from roughly £24 of every £100 spent on R&D to £32.