THIS CASE STUDY EXEMPLIFIES THE APPLICATION OF KEY LEGISLATIVE REQUIREMENTS FOR ELIGIBLE R&D ACTIVITIES AS THEY APPLY TO RELEVANT ACTIVITIES IN THE FOOD AND BEVERAGE INDUSTRY.
BUSINESS SCENARIO
Bryan Beef is a privately owned manufacturer of processed beef products for the food and retail industries in Ireland. As part of the food and beverage industry, Bryan Beef is constantly focusing on new product development to remain competitive in the field. It is regularly conducting R&D activities to come up with new products relating to food safety, cost reduction, organic/natural products, dietary guidelines and sustainable resources.
To keep up with the times, Bryan Beef launched an R&D project with the main business objective being to produce certified organic beef products. In order to do this, Bryan Beef had to completely reinvent its manufacturing process.
Bryan Beef had never claimed the R&D tax incentive before, and believed its activities would not qualify. To be eligible, Bryan Beef’s projects had to meet the requirements below:
- Be in the field of science or technology
- Involve one or more of these categories of R&D:
- Basic research
- Applied research
- Experimental development
- Seek to make scientific or technological advancement
- Involve the resolution of scientific or technological uncertainty.
After meeting with a specialist, Bryan Beef realized it was eligible for the credit.
BRYAN BEEF’S ELIGIBLE R&D ACTIVITIES
The R&D tax credit specialist helped Bryan beef determine its qualifying R&D activities, many of which were part of the company’s daily operations. Bryan Beef’s qualified research expenses (QRE) included:
- Development of new or improved product formulations to meet changing consumer preferences;
- Development of new packaging to extend the shelf life of products;
- Modifications to existing manufacturing processes to comply with new regulations;
- Development of manufacturing processes to accommodate new products or optimize processing;
- Automation of manufacturing functions to minimize product contamination;
- Continuous improvement projects aimed at reducing scrap, waste, and spoilage and/or conserving water and utilities; and
- Machine layout design changes to reduce manufacturing time and increase production.
Bryan Beef claimed the federal R&D tax incentive and a sustainable methodology was also established to help the company identify, document and substantiate eligible R&D projects and costs on an ongoing basis.
WHAT RECORDS AND SPECIFIC DOCUMENTATION DID BRYAN BEEF KEEP?
Similar to any tax credit or deduction, Bryan Beef had to save business records that outlined what it did in its R&D activities, including experimental activities and documents to prove that the work took place in a systematic manner. Bryan Beef saved the following documentation as evidence:
- Project records/ lab notes
- Conceptual sketches
- Design drawings
- Photographs/ videos of various stages of build/ assembly/ testing
- Prototypes
- Testing protocols
- Results or records of analysis from testing/ trial runs
- Tax invoices
By having these records on file, Bryan Beef confirmed that it was compliance ready — meaning if it was audited by Revenue, it could present documentation that illustrated the progression of its R&D activity, therefore proving its R&D eligibility.
