Today’s economy of changing tastes, convenience needs, and dietary restrictions, motivated by a growing consumer base focused on making health-conscious and easily accessible food choices, has brought research and experimental development activities to the forefront of the food and beverage industry. This ever-evolving demand is the basis for the development of new products and a crucial step in refining existing products and processes. To recognize these important activities, the Canada Revenue Agency (CRA) administers the Scientific Research and Experimental Development (SR&ED) Tax Credit claim program, providing a tax credit on eligible R&D expenditures related to product or process development including labor, materials, and subcontracting costs.
The SR&ED program can thus have a significant impact on the affordability of product development. But SR&ED isn’t solely concerned with your R&D team: Eligible SR&ED costs and claims may be initiated, supported, or documented in other operational areas, especially quality assurance and food safety. Both of these areas are fundamental parts of any food and beverage company’s daily operations, and they present a typically well-authenticated opportunity to initiate, support, and document experimental development activities and associated costs. As two departments that rely heavily on documentation and analysis, quality assurance and food safety are not only important to a business’s bottom line, meeting industry standards, and quality production, but also offer a wealth of information that can lead to SR&ED claims that were previously missed or undervalued.
Quality assurance and food safety are not in and of themselves SR&ED tax credit eligible, as standard quality assurance and food safety practices and procedures are not claimable costs under the program; however, both can relate to eligible experimental development activity projects in a variety of ways. First, quality assurance and food safety projects may be a center of SR&ED project initiation if they instigate work that goes beyond standard operating procedures and instead seeks to resolve a recurring or prevalent issue in a way that expands your company’s, or your industry’s, knowledge base. Second, it is quite common that quality assurance and food safety activities support SR&ED eligible R&D projects within your facility, especially in terms of data collection, testing, and analysis, as well as process augmentation to assist with new product development or overcoming current product challenges. Finally, both food safety and quality assurance activities can provide well-documented, reliable, and contemporaneous support for other eligible projects, a key requirement of the SR&ED program.
Routine quality assurance testing and standard product qualifications are not SR&ED eligible costs, but these same operations can be a starting point for SR&ED projects. Quality assurance can often be an initiator of eligible projects; for example, inconsistent processing results or a sudden and unexpected decrease in yield or quality identified in the quality assurance department may prompt investigation and problem solving, leading to a project that requires knowledge base growth. These projects can also be instigated by processing result, quality, or yield concerns that arise from new product development where quality assurance identifies work needed and initiates new projects.
Due to evolving consumer demands, many companies are looking to remove functional ingredients from their products, such as lactose, sodium, or gluten. However, removing an ingredient or altering the chemical composition of food products often results in unintended and undesirable changes especially when the ingredients have functional properties. These can range from a change in product texture or appearance, usually the result of functional ingredient removal such as eliminating gluten or salt, to a decrease in shelf life due to the removal of a preservative agent. The removal of sodium, for example, can alter the moisture absorption properties of a product or cause necessary modifications to cooking methods. In this case, quality assurance work acts as a support to an eligible SR&ED project, namely by resolving these quality issues, whether as a result of additional tests undertaken, longer term testing, or more complex data collection. Regardless of the focus of this research and development, whether it be for new products or modifications to an existing product line, work done to overcome these challenges and ensure product quality is often SR&ED eligible.