When it comes to plant science, research and development is fraught with uncertainty. Fiscale was in no doubt from the outset that Blackman Agriculture Ltd would satisfy the criteria set by HMRC for eligibility for R&D Tax Credit.

rd tax credit claim success for Blackman Agriculture ltd

Case Study - Blackman Agriculture Ltd

Fiscale “separates the wheat from the chaff” when it comes to the preparation of an R&D Tax Credit claim for a leading wheat breeder who is breeding record breaking grains.

Creating a quality, high yielding and disease resistant variety is a time consuming and complex process. The team at Fiscale enjoyed the challenge of getting to grips with the complexity of the research activity undertaken by Blackman Agriculture Ltd, in the pioneering of new strains of cereals. Fully understanding the process behind the invention of a new variety of wheat enabled Fiscale to identify all the key elements that could be covered in a claim for R&D Tax Credit.

When it comes to plant science, research and development is fraught with uncertainty. The uncertainties have to be managed through extensive analysis, testing and field trials. Fiscale was in no doubt from the outset that Blackman Agriculture Ltd would satisfy the criteria set by HMRC for eligibility for R&D Tax Credit.

Our challenge was to articulate the impact that the diversity of characteristics, genetic sequences and interactions have on new product development and then to assign a monetary value to that process.

The background

Blackman Agriculture Ltd was established in 2004 by independent plant breeder John Blackman. John has built a reputation as one of the leading breeders in the country for developing robust and versatile cereals. The company, based in Cambridgeshire, sell their varieties in the UK and globally through a network of third party partners on a royalty fee basis.

The varieties are created for a specific environment, geographic location and end use. Premier wheat brand names include: Mulika, the UK's market leading breadmaking spring wheat; Monterey, developed primarily for the export market and biscuit making sector; Delphi which is suitable for distilling and Belepi, which offers a wide window for harvest with suitability for domestic and export milling. The latest variety, Monroe winter wheat, is currently performing well in trials. It was created for Scotland and the Northern parts of England which experience lower levels of sunlight.

Blackman Agriculture's barley variety 776 made it into the Guinness Book of Records in 2015 when a New Zealand farmer, Warren Darling, had a record breaking harvest at his farm in Timaru, on the South Island. The world record harvest of 13.8 metric tonnes per hectare was achieved on the 23rd January and ratified by the Guinness Book of Records on 15th April 2015. The 776 barley had been specifically developed to thrive in the growing conditions found in New Zealand.

John Blackman was made aware of the R&D Tax Credit scheme by his accountant, who had recently signed up to Fiscale's network of professional referrers.

The challenge

The biggest challenge facing Blackman Agriculture Ltd relates to the extent of the uncertainty involved in the process of developing a new variety of wheat or barley. The uncertainty starts with the biological outcomes that occur when crossing breeding plants - will one parent plant work with another?

Disease resistance is a critical factor for any crop. Uncertainties abound when considering whether a new variety will be disease resistant and in anticipating the types of diseases that may develop in the future which could be detrimental to the health of a crop. Changes in climate increase the scale and frequency of emerging plant diseases. Developing a new grain requires the use of new diagnostic techniques, such as field pathogenomics.

Additional uncertainties arise depending upon the environment where the grain will be grown. Different soil compositions, previous crops grown on the land and climates will affect both the yield and the quality of the crop.

Once these have been addressed the wheat variety must be added onto the National List before it can be certified and marketed in the UK.

The criteria for inclusion on the National List is that the wheat must be “distinct, stable and sufficiently uniform and have satisfactory value for cultivation and use.” Following the National Listing, if the variety meets the criteria of the Agriculture and Horticulture Development Board (AHDB), it will through a further year of testing and if successful be added to the Board’s Recommended List. One of the criteria required for this classification is that the wheat has “a 2% yield advantage compared to current varieties” or other compensating factors.

Since yield and quality can be affected by the weather, which is at best unpredictable, the testing phase for any new variety of cereal can last over several seasons and it can be years before a new variety is commercially available.

The solution

Blackman Agriculture Ltd was introduced to Fiscale by their accountant, who acknowledged the specialist nature of the R&D Tax Credit scheme.

Stephen Bunting, Fiscale's Technical Director made an initial discovery phone call to Managing Director, John Blackman, to establish if they were eligible. During the conversation the level of uncertainty surrounding the research was evident.

At the initial meeting with John, Stephen uncovered the true complexity of the research and development activities taking place.

This was the first client that Stephen had dealt with that was involved in biological research and development. It was a different concept to the commercial and industrial research projects with which Stephen had previously been involved. The level of uncertainty was much higher with so many contributing factors - such as the weather, disease, pest infestation - over which there was no control.

After the meeting and three phone calls, to establish the detail of specific projects, Stephen compiled the initial draft report for HMRC which was sent to John for his approval. The report was then submitted to the specialist HMRC R&D Tax Credit team in Leicester.

The results

The turnaround from the initial contact phone call to the successful submission of the claim was approximately four months.

John was delighted with the amount of the R&D Tax Credit relief received that he could use to offset against future profits.

"I am very happy that our accountant introduced us to Fiscale. It was very clear that Stephen and the team have a lot of experience in the area of R&D Tax Credit claims. I think they did find our business unusual and they really needed to gain an understanding of how we carry out our research activities.

Our product development process is complex and, as Stephen discovered, faces many uncertainties. It is also a lengthy process. We are not exactly creating new products every day! New varieties of cereals can take years to reach the market from the initial product development phase.

Our input into gathering the required project information for the claim took a few days over the period of a couple of months. It provided a healthy return on investment! Fiscale dealt with the accounting aspects of the claim with some input from our accounts team.

All in all the exercise was pretty painless and well worth doing.

Would we recommend other businesses claiming R&D Tax Credit? Yes, definitely!”

John Blackman, Managing Director, Blackman Agriculture Ltd

 

The conclusion

Blackman Agriculture Ltd has offset the R&D Tax Credit against future profits. A further claim is being prepared by Fiscale's R&D Senior Tax Manager, Kate Greenhough.

With Fiscale’s deeper understanding of the nuances of agronomy, the client’s appreciation of the elements of their work eligible for R&D Tax Credit relief and the implementation of a robust record keeping system it is envisaged that future claims will be straight forward.

 

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