Agriculture matters. It’s an essential industry, many take it for granted. We believe it’s an industry that deserves all the support it can get to improve sustainability while ensuring future profitability. Yet many farmers are unaware that they are eligible for R&D claims within the UK.
From our early days in medical cannabis to our work with cooperatives, farming, and agritech, we have established ourselves as experts in the field of agriculture and agritech R&D tax claims. After working with various clients in the sector for years, we can safely say that we have the most experience in getting successful agriculture claims in the whole of the UK. We’re proud to have built up a wealth of knowledge in the industry from an R&D tax and technical perspective.
However, making claims in agriculture comes with its challenges. Still, over the years, our team at Granter has managed to develop solutions and found opportunities for our clients to help them grow and build their businesses for the future.
You know what they say about cannabis being a gateway for other things? Well, for us, cannabis was our gateway into the world of agricultural claims, most specifically medical cannabis.
“We were really interested in the new medical cannabis industry,” says Liall, our CTO at Granter, “We needed to understand how to overcome the existing barriers to access traditional sources of funding and the general technical challenges faced by the medical cannabis sector in the UK. It’s an area we’re passionate about, making sure the medical potential of the plant is fully realised, so we also wanted to use our capabilities to add value to the sector in the UK. It ended up being that medical cannabis had a lot of regulatory issues that were always going to take a lot of time to be resolved, that’s another story, but it snowballed slowly into agriculture.” We got our first agricultural client at the end of 2019, a medical cannabis producer who received one of the largest UK cannabis R&D rebates to date.
“We were invited to the leading medical cannabis exhibition in Poland where all of the leading companies in pharmaceutical cannabis attended. We went to gain a better understanding of the industry but our networking resulted in securing one of the first fully vertically integrated cannabis companies in Europe that was based in the UK, and I think that claim was probably one of the first instances of any kind of cannabis-related funding from the government.”
After planting the seeds with medical cannabis, Granter’s agricultural vertical sprouted organically. Although our team came from various engineering fields unrelated to agriculture, the team had experience working with food production companies and some of the largest food brands in Europe such as Bird's Eye, Iglo & Findus. This knowledge was put to good use in optimising the Granter claim process to maximise efficiency and returns to the industry.
Once Josh, our Head of Commercial Operations, joined our team, he looked at things from a commercial strategic perspective and noticed that we had built up a strong agriculture client base, so he thought why not focus more specifically on the agriculture sector? It not only offered potential for our business, but as an industry, it’s an essential one that we could help in the journey to become more sustainable and increase animal welfare. Over time as our experience grew, we became one of the leaders in claiming R&D Tax Relief in this sector and started to connect our network together where we found synergies
The more we worked with agriculture clients and learned about the industry, the more we realised it’s an uncultivated area when it comes to R&D claims.
“As far back as only 4-5 years ago, only 0.5% of HMRC R&D tax credit claims came from the agricultural sector, even though a lot of what they do day-to-day can qualify, particularly within farming where it is vital to continuously improve efficiency to maintain profitability,” Josh recounts, “There’s a massive blue ocean for us to swim in with regards to supporting those businesses because they don’t understand that what they do counts as research and development.”
In 2018, the number of farms that made claims in the whole of the UK amounted to roughly 400. We realised that it made sense for us to work with businesses that the market has traditionally underserved.
However, it would be inaccurate to say that farms and agricultural businesses made no claims applications at all, but their existing process of making claims was inefficient and also resulted in underclaiming. “Accountants can, and most of the time do, file tax credits for their clients, including agriculture,” says Liall, “However, their legislative knowledge of R&D for tax purposes and technical knowledge was much more limited to what we can offer as experts in the field and ex-engineers. We have seen that larger farms and companies have been consistently claiming in the past however, smaller ones haven’t known how to qualify their work for the scheme with enough confidence to ensure compliance and limit time taken away from business activities.”
Although our team members don’t come from an agricultural background, over the years, we’ve led campaigns together in agriculture and we’ve built up very in-depth knowledge of the industry and experience over the vertical. Also, our team members' engineering background has also helped us view the industry through a more systematic lens.
“Because we have come from the school of engineering, the way that we think is generally much more systematic. It’s allowed us to have a much more systematic and scientific approach when unpacking agriculture work, which I think married quite well with this specific industry,” adds Liall, “For example, if we to go a traditional engineering industry, they’re on the same page as we speak their language which make it very efficient when unpacking their R&D. However, in traditional agriculture, while they are using scientific knowledge and experience on a day-to-day basis, the data that is captured is very limited and sporadic. That’s what we can offer the client: a systematic, mathematical & science-based approach to structure and record their technical activities in the future, which makes highlighting technical challenges and solutions much more efficient.”
We’ve found those in agriculture work on a very non-quantitative basis. Sometimes, our clients don't know the specifics of what they did, when, and what the specific trials were. “They’re not really aware of the variables that they’re altering and what performance indicated, how that directly affects the performance indicated. It’s all very non-quantitative. And that’s just because traditionally farmers have never had the need or a reason to think in a systematic or mathematical or logic-based way,” concludes Liall.
By translating the R&D data available with a scientific lens into clear language and structure that HMRC expects when inspecting a claim, we can help those in agriculture make the proper claim. We take that raw data, process it, and create a claim that showcases the importance of the work that, most importantly, ticks the boxes HMRC needs.
The road to agriculture claims is a bumpy one. Not just because those working in agriculture may not realise they are entitled to R&D claims and other hurdles in the claims application, but the R&D Tax legislation is also changing all the time.
Right now, one of our main challenges is that UK farmers are poised to lose key funding through unprecedented change through a new agricultural bill and the transition to subsidies based on sustainable practice. And that's not to mention that the industry is already under pressure to be more sustainable by reducing emissions and water consumption and keeping up with the production demands of the UK population. That’s all before we have to deal with the labour shortages in light of Brexit. Those in agriculture can handle this by adapting farming practices to be more sustainable and implementing new technologies that can help keep farming profitable and keep up with changing consumer trends like meat consumption and environmental impact change. But all of that costs money.
Many in agriculture are losing money right now for various reasons, but there are opportunities to gain back some of that money they have lost through R&D claims, which they can reinvest. The trouble is many in the industry don’t even know where to start. Let’s take the example of the way the data from the R&D claims process is handled.
“We were working with a very large farming cooperative doing large scale trials to produce antibiotic free livestock. We had to analyse a series of large and disparate datasets from over 40 trials and present the data in a way that was concise and also representative of their work to HMRC. The large amounts of information was incomplete and semi-structure, so we found a way to efficiently complete the analysis and find a way to present the trial results to HMRC.”
Agricultural claims pose a tricky balance, as those in HMRC assessing the claims are not technical people, but they still have strict criteria for what does and does not qualify as R&D. Our experience means that we know how HMRC will interpret the work and what specific information they are looking for in order to approve the claim without any further questions that would delay the payment of the benefit.
Plus, HMRC needs to process a lot of claims with limited resources. This means the claim application needs to be as concise as possible by efficiently illustrating how the work complies to R&D legislation and we also need to make sure the complex conclusions we’re trying to draw makes sense to a non-technical claims inspector. “We need to do it in a way that simplifies technical jargon while making it obvious that the application is R&D, so you’re not underplaying it by simplifying it too much. So it’s that kind of balance actually,” concludes Nas.
We’ve helped a wide network of farms bridge the gap in funding, so they can reinvest back into the farms and implement regenerative farming, reduce soil erosion and runoff, increase the welfare of animals by reducing the reliance on antibiotics. We’ve successfully delivered some of the largest amounts of funding in the industry as we’ve managed to strike a balance between translating the complexities of agricultural research into a concise claim.
For the claim to qualify, we need to show there was a technical challenge in generating new knowledge.
“We demonstrate this with a systematic and iterative process that if we try this, that doesn't work. If we try that, that won't work. That kind of trial and error approach, doing research to gain knowledge that does not exist in the public domain, applying that research, testing it, seeing what the shortcomings are, and then doing that kind of development process,” says Nas, “It proves that what you’re doing takes time and you wouldn’t spending time and money on something that you could just pick up on Google or existing industry knowledge that tells you how to do it, because why would you waste your money in that way? You’re doing things in a systematic manner, so you’re not stabbing in the dark trying to guess what the answers are. It’s actually a scientific and logical process. And if you demonstrate that with a case study project, it’s obvious how those three boxes are ticked within the sections of how we layout and structure the report. It’s obvious to the inspector at the very beginning that they could tick those three boxes, put a green stamp on the claim and shelve the claim out.”
Our mission here at Granter is to build a circular ecosystem. We want to connect the very traditional agricultural industry to agritech and finance to help farmers step into the future. Getting the claims back is a step to help farmers reinvest in and finance new solutions, but we help them find the best way to use that reinvestment.
“The financial part of the claims are quite formulaic, and we have automated 90% of this element of the claim process to enable us to go through all of the expenditure in the company to ensure all relevant costs are included without the possibility of human-error. Due to the large amount of unstructured data and input data formats, this was not possible before implementing automation without taking an inordinate amount of time” says Nas, “The actual consulting value comes from the conversations we have with our clients to interpret their work, understand key challenges and the process to resolve them, on a project basis. We guide our client to relevant R&D activities through organic questioning using our engineering knowledge rather than purely asking them 'what R&D do you do?'. This way you can still elicit the information you need efficiently because you are speaking their language and do not require any pre-requisite knowledge on what R&D is for tax purposes, on their part.”
We’ve made the process easy for our clients and efficient for our consultants. All we need to do is sit down with our clients and ask a few questions about their business and their research. Sometimes, we find something that sparks the discussion, and we delve into that topic further. When we consult with the client, we find opportunities for R&D claims that an accountant may not. Not to mention that unless we’re talking about a large scale farm, usually they won’t use a management consultant like us. Most working in agriculture will claim through an accountant, as most consultants charge significant fees.
Generally, we’ve found that the uplift can be around 40% when claiming through Granter compared to working with an accountant. “The cooperative we just got was with a very large accountancy, who have a dedicated R&D claims team, in theory, but they were missing out on over £300,000 a year. By coming over and working with us, there’s an extra 300 grand in their account,” adds Josh.
Generally, we’ve found that the uplift can be up to 40% when claiming through Granter compared to working with an accountant.
“We started working with a farming cooperative that was with a very large accountancy, who have a dedicated R&D claims team, in theory, but they were missing out on over £300,000 a year. By coming over and working with us, there’s an extra £300,000 in their account with complete peace of mind in terms of compliance.
The future is uncertain for everyone, but for agriculture, it’s especially precarious. Grant funding is changing in the UK due to new agricultural bills and legislation, and that’s before all the uncertainties that accompany Brexit.
“All farmers are losing their traditional subsidies and grant funding from the government, and there’s new agricultural bills and legislation coming in that’s going to completely change the way the farmers get money in from the government and subsidies. So we’re offering another way to help bridge that gap,” says Nas.
With all the changes and challenges facing farmers, innovation is the key to finding effective solutions. It’s important now more than ever for those in agriculture to invest in sustainable and improved practices. For example, since Brexit, labour shortages are one of the most pressing issues in farming in the UK.
“Let’s take fruit picking as an example,” Josh adds, “If you take one example from start to finish, and look at the challenge facing farmers who haven’t got the people and they can’t pay the wages for fruit picking. If they don’t invest in technologies, for example like automated pickers, in the long-term, they’re gonna end up wasting thousands of pounds of produce.”
We know that saying you could do XYZ can be frustrating, especially if you're not sure where to even start. We can help farmers there too. Granter can help connect them to companies they may want to work with in terms of adopting technologies to support automation on the farm, for example. Plus, we can help you recoup up to 33% of the money you spend on those projects. And we’ll make it easy for you, as we’ll put the processes in place, so you know where to go over the next 4 to 5 years. Over time, you won't just find ways to make the farm more sustainable and more profitable.
“Things need to change very quickly,” says Liall, “I think we’re trying to do that. The positive thing is that the industry is getting more mainstream attention. That is where I see the major change is starting to come into play. I'm seeing city dwellers, people who live away from where food is produced, now getting introduced and interested in actually growing their food. There is an increased interest in things like hydroponics, urban farming, which has potential to be very interesting. On top of that, agriculture is so environmentally damaging when you look at it from the industry [point of view]. And it’s such an inefficient process generally. I’m speaking very generally, though. But I do see that the mainstream is slowly turning their attention to it, given climate concerns, given environmental concerns, given health concerns, people are more health-conscious, they want to know more, have more to do with their actual food.”
Another trend we’ve seen is the general public wants more information about where their food is coming from, but there is no infrastructure or system in place for the sources of food, i.e., the growers, to pass this information on. This transparency and communication is also something farmers can look at. For example, some people are going to use blockchain technology to help that process and inform people with current and reliable information to communicate more about food and its sources.
The future of agriculture and agritech lies in connecting the ecosystem. We believe we can connect farmers and the general agriculture business with the agritech and technology side of things because the adoption of technology will be key to moving forward in terms of sustainability and profitability.
If you’re a company working in agriculture or R&D in any of our other industries, and you are uncertain about how to make tax claims for your company, then we can help you navigate the claims process. See how much you can claim with our benefit calculator or contact us today to find out how you can claim money back for your R&D projects.
