R&D IN HOSPITALITY
Hospitality has most certainly been one of the industries hit hardest by the effects of the pandemic, and therefore one which could do with all the help it can get, including tax benefits. It is however an area in which there is unlikely to be a large amount of eligible R&D. In this blog we’ll attempt to explain why this is, and highlight the few areas that may well hold eligible spend for an R&D claim.
NON ELIGIBLE SPEND
As with previous sectors we have covered, it’s good to start out with an understanding of the types of hospitality functions and processes that don’t tend to do any eligible work.
Lets look first of all at single or small groups of hotels, restaurants and other hospitality venues. At this smaller scale, it’s highly unlikely to have any eligible spend, mostly because there’s nothing technical or scientific about the core business, and no urgent need to make scientific or technical advances to improve services.
Moving up the scale, larger hospitality groups are likely to undertake regular, large projects to improve their venues and service offering. However, these are often focused on commercial or logistical innovations, and again wouldn’t require the company to make scientific or technical advances.
Now you are probably wondering what does constitute eligibility in the context of R&D, and you’d be right, it is one of the least likely industries to have eligible spend. That said, there are a few narrow areas that would be applicable, and if any of this below applies to your business, it would be well worth reaching to have a conversation.
Automation of various functions—from hotel check-ins to food-ordering in restaurants—is a hot topic in hospitality at the moment, and will require advances to be made in software science. However, for individual hospitality companies to be able to claim for this type of work, they’ll have had to arrange it in one of two ways:
- The first option is to have hired in-house software developers who are able to build the required software and identify where the advances and technical uncertainties lie. This would lead to a robust and straightforward claim for the hospitality company.
- The second, and more common option, is that the hospitality company subcontracts the development work to a third-party software developer. In this situation, the hospitality company would only be able to claim if they know upfront that their work requires advances to be made in software science, and the contract is explicit about this need for R&D.
Food and restaurants
Recipe development and food production at the restaurant kitchen scale is unlikely to be eligible; there’s just little scope to be making any kind of advance in food science. The one exception to this is at the very cutting edge of restaurant innovation, where chefs are working in the area of, for example, molecular gastronomy. In restaurants like these, they go far beyond any established processes and techniques, and often develop their own production machinery. These new techniques and ways of producing food can require advances to be made in food science, chemistry and engineering, and in these cases would qualify for R&D tax relief.
As with a lot of the less eligible sectors, the supply chain to the hospitality industry is far more likely to yield eligible claims than the industry itself. For example, developers of point of sale devices or apps to make the checking-in process in hotels easier are likely to be making advances in software science, and food manufacturers producing goods at a large scale to supply into cafes could be advancing food science. Even the laundries working to supply clean linen to hotels could have eligibility, for example in improving cleaning products to lessen the environmental impact, or in tracking systems to enable efficient cleaning and delivery of thousands of items.
In summary, hospitality is clearly not a hot-bed of eligible R&D. However if any of the above has prompted thought or raised a flag as to what actions your business has taken, Tychon would be happy to have a conversation and help determine if indeed there is a claim.