The role of R&D tax credits in the future of the Irish agri-food and fisheries
The agri-food and fisheries sector accounts for 7.7% of national employment, 10.5% of total exports and contributes €24 billion to the national economy (i). The value of exports are at record levels and as Irish companies develop new successful products and enter into new high growth markets in the BRIC nations, this level of growth looks set to continue.
The government’s strategic plan for growth in the Irish agri-food and fisheries industries, Harvest 2020, is focused on an approach that is smart and green, with the aim of achieving sustainable growth. Innovation, increased productivity and enhanced skills play a key role in achieving the growth targets set out. But undertaking the required R&D to develop new innovative products, achieve increased productivity and sustainability and meet the trends of increasingly health, environmentally and socially conscious consumers is expensive.
So how can growing companies fund the work required to achieve this?
One option is utilising the R&D tax credit. The R&D tax credit allows companies to benefit from a potential cash refund of 25% of their qualifying expenditure. Qualifying costs include staffing costs, materials, capital equipment, overhead costs and, with certain restrictions, subcontracting costs, be they to unconnected third parties or universities.
R&D in the food industry is not just seen in laboratories, it encompasses a wide variety of activities in the entire production chain from primary producer through to the final processor and beyond. To help identify potential activities being undertaken by your company we have compiled a number of case studies. The case studies are a few examples of the types of activities that can potentially qualify for inclusion in an R&D tax credit claim under S766 TCA 1997.
There are strict criteria to be met for activities to qualify, some of which are dealt with in this article. In order to determine if your company is undertaking qualifying R&D activities call a member of our team.
Animal feeding strategies
FeedCo specialises in pig production. Due to the increased cost of feed inputs the company undertook an investigation to determine if compensatory growth could be incorporated into their feeding regimes.
The aim of the project was to reduce feed costs while maintaining current production levels. FeedCo undertook extensive research into the existing knowledge relating to feed restriction and compensatory growth. Based on the research, FeedCo hypothesised that following a period of feed restriction pigs could potentially undergo enhanced or accelerated growth and achieve pre-determined inherent slaughter weight.
To assess this, the company initiated a feeding trial involving 200 pigs. Compensatory growth feeding strategies were shown to affect the organoleptic properties of tenderness of meat in many species. Consequently, FeedCo assessed the meat quality characteristics to potentially highlight any adverse effects associated with this feeding study through investigative activity that included a sensory taste panel.
New product development
YogCo is a producer of yoghurt and yoghurt drink products. In order to meet growing consumer demands, YogCo set out to develop a new ready to eat savoury product that could be consumed directly from the carton or used as dressing in salads.
At the outset of the project the company undertook research into related products, reviewed the available literature and consulted with numerous ingredient suppliers. Following extensive research YogCo was scientifically uncertain if it would be possible to incorporate a vegetable portion representing “one of your five a day into the product while still retaining the desired viscosity and consistency.
YogCo was also uncertain if it would be possible to achieve a 3 week shelf life, matching the shelf life of the existing product range and if the product would meet the desired sensory requirements.
YogCo carried out kitchen trials, microbial testing, sensory panel testing. Following six months of experimental investigation, the project was suspended as YogCo could not overcome the many challenges and scientific uncertainties associated with the project.
XYZ is a machinery manufacturer supplying new machinery solutions to the fish processing industry. The company is involved in updating its existing range of machinery. Through its extensive knowledge and experience in the sector, the company identified the need for a new automated filleting machine.
The requirement was for a unit which addressed the problems within the existing technology including those relating to efficiency, quality, adaptability, cost and functionality. The company sought to develop a machine that would increase the speed of throughput for the filleting machine, incorporate new technology and reduce down time. XYZ’s initial investigation into the “state of the art” available on the market showed that it did not meet the functionality and performance objectives. Throughout the project new concepts were explored, analysed and significant testing undertaken both internally and with selected industry clients. Throughout the testing process failures were encountered, some were apparent immediately and others after prolonged testing.
Further R&D and testing would be required to develop a working prototype that meets all requirements.
(1) Department of Agriculture, Food and the Marine