Identifying eligible clients in hospitality
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Something we hear time and again from our clients is that they struggle to identify clients in their client base who would be eligible to claim R&D tax relief. So, in a new blog series, we’ll be digging into some less obvious sectors and discussing what to look for when assessing eligibility!
In the fourth part of this series, we’re looking at hospitality. In a change from our previous subjects, this is an area in which you’re very unlikely to find eligible R&D. In this blog we’ll attempt to explain why this is, and highlight the few areas that are worth focussing on with your hospitality clients.
What to avoid
As with our previous subjects, it’s good to start out with an understanding of the types of hospitality companies that don’t do any eligible work. In this sector, unfortunately, the answer to this is most of them!
The main thing to avoid here is small: usually single or small groups of hotels, restaurants and other hospitality venues. At this smaller scale, it’s highly unlikely that there will be any eligible work going on, mostly because there’s nothing technical or scientific about the core business, and no urgent need to make scientific or technical advances to improve their 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.
At this point, you’re probably wondering if it’s worth thinking about your hospitality clients at all in the context of R&D, and you’d be right—you’re unlikely to find anything. That said, there are a few narrow areas worth looking at.
Software development projects
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
As we’ve discussed previously, 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 we’ve discussed, 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.
Overall, for us hospitality is a ‘no, but—’ industry when it comes to R&D tax relief, so it pays to know what you’re looking for in this sea of ineligible companies.