Could the food and beverage sector be leaving R&D tax credits unclaimed?

Food and beverage businesses are under constant pressure to innovate. Whether responding to legislative change, reformulating for consumer demand, improving sustainability credentials, extending shelf life, or scaling production efficiently, innovation is no longer optional. Yet many food and beverage manufacturers still overlook tax relief as a valuable source of funding, leaving R&D tax credits unclaimed.

In food and beverage, qualifying R&D can sit in the practical technical work required to make a product stable, scalable, compliant, and commercially viable. Many companies are undertaking qualifying R&D every day without recognising it. Under the merged R&D Expenditure Credit (RDEC) scheme, this presents both an opportunity and a risk: businesses may be valuable relief unclaimed simply because they do not recognise where qualifying activity exists.

What changed under the merged RDEC scheme?

The merged RDEC scheme introduced a more streamlined approach to R&D tax relief, replacing the previous SME and RDEC schemes for most claimants. While eligible R&D-intensive SMEs may still benefit from Enhanced R&D Intensive Support (ERIS), the majority of food and beverage businesses now claim under a single framework.

One significant benefit of the merged scheme is that the credit remains an above-the-line incentive. This means it is recognised within operating performance, providing greater visibility in EBITDA and making the value of innovation more apparent to investors, lenders, and stakeholders. For private equity-backed manufacturers, large food groups, and ambitious growth-stage brands, this can be particularly valuable.

However, the merged regime also introduced important changes to the treatment of contracted-out R&D. As a result, food and beverage businesses need to pay closer attention to who is entitled to claim when product development, formulation work, manufacturing trials, testing, or scale-up activities involve third parties. Understanding the contractual arrangements underpinning innovation projects is now more important than ever to ensure claims are both maximised and compliant.

Where R&D actually happens in food and beverage

One reason the sector may underclaim is that they often take too narrow a view of what counts as R&D.

For tax purposes, qualifying R&D is about whether a business is trying to resolve scientific or technological uncertainty. In food and beverage, that happens more often than many teams realise. Examples include:

• Reformulating products to reduce sugar, salt, fat, or allergens while maintaining taste, texture, stability, or shelf life
• Developing clean label alternatives without artificial stabilisers or preservatives
• Scaling recipes from kitchen concept to commercial production
• Improving manufacturing yield or reducing waste
• Testing packaging alternatives to meet sustainability targets without compromising product quality
• Extending shelf life through reformulation or process changes
• Introducing automation or production line improvements to overcome technical production constraints
• Developing alternative ingredients, including plant-based or low/no alcohol products

The challenge is that many of these activities feel like business as usual. But “routine” for an experienced technical team does not automatically mean non-qualifying.

For example, reducing sugar in a baked product is rarely a simple ingredient swap. Sugar affects flavour, moisture retention, structure, texture, and process behaviour. Reformulation requires multiple iterations, failed trials, and cross-functional technical input before a commercially viable result is achieved. That is exactly where qualifying R&D can sit.

The subcontracting trap for food manufacturers

Food and beverage innovation is rarely delivered entirely in-house. Many businesses rely on:

• Third-party development kitchens
• Contract manufacturers
• External food technologists
• Specialist testing providers
• Sensory or tasting panels

Under the merged RDEC scheme, ownership of R&D activity is not always straightforward. If a retailer commissions a supplier to develop a product, who is entitles to claim? If a manufacturer outsources technical development, can it still claim for that activity? The answer depends on contractual arrangements and the nature of the engagement. This is particularly important for fast-growth brands and PE-backed businesses that increasingly use outsourced development models.

Getting this wrong can result in missed opportunities, reduced claims, or unnecessary compliance risk. While reviewing contracts is an important first step, entitlement under the contracted-out R&D rules is rarely determined by a single clause or agreement. Understanding who initiated the R&D, who bears the technical and financial risk, and who ultimately benefits from the outcome often requires a detailed assessment of both the contractual position and the wider commercial reality.

For this reason, businesses should be cautious about making assumptions based solely on contract wording. Specialist R&D tax expertise can help identify the factors that determine entitlement, ensuring claims are both maximised and robustly supported in the event of HMRC scrutiny.

Why HMRC scrutiny creates hesitation

Another reason businesses may be cautious about claiming is concern around HMRC enquiries. Food and beverage claims can face additional scrutiny because qualifying activity is sometimes misunderstood by non-specialists.

Unlike sectors where R&D is more immediately recognised, food innovation can be incorrectly dismissed as routine product development. That creates hesitation among businesses and even advisers who lack sector-specific technical knowledge.

As a result, strong claims in this sector require robust technical articulation that clearly demonstrates the underlying scientific or technological uncertainty.

Why food and beverage businesses miss value

Common missed opportunities include:

• Only including NPD team costs
• Excluding engineering and production trial activity
• Missing packaging innovation work
• Failing to capture consumables linked to experimentation
• Overlooking subcontractor implications
• Poor documentation due to fast-moving seasonal development cycles

In many food businesses, product development starts months ahead of seasonal launches, with multiple teams involved across technical, operations, engineering, procurement, and manufacturing. Without a structured process to capture data, qualifying activity gets lost.

How Ayming helps food and beverage businesses maximise claims

Food and beverage R&D requires sector-specific expertise. At Ayming, our teams combine tax, scientific, engineering, and manufacturing knowledge to identify qualifying activity and expenditure from all angles.

We work with a wide range of food manufacturers and growers, helping build robust, defensible claims aligned with HMRC expectations. We also have a track record of uncovering missed innovation in supply chain operations, resulting in several instances of claim value uplift for clients.

For businesses questioning whether their activity qualifies under the merged RDEC scheme, the bigger risk may be assuming it does not.