Recipe for SR&ED Success in Food Research

How do you determine if recipe development qualifies for SR&ED tax credits? Distinguishing SR&ED from routine activities has been an ongoing challenge for the food and beverage industry. Technological uncertainty when developing new and improved products was clarified in the recent case of Biscuiterie Dominic Inc. vs. His Majesty the King (2024 CCI 97). The case emphasized criteria required for technological uncertainty in recipe development: 

• Were the issues unable to be resolved using typical or known techniques? 

• Was the work aimed at underlying science of ingredient interactions and their impact on production processes? 

• Was quantifiable data collected and analyzed? 

The Court Case

The projects undertaken by Biscuiterie Dominic and their collaborator, Petite Bretonne, focused on common food industry objectives, such as extending shelf life and eliminating certain ingredients. The issue was whether the associated risks could be overcome via standard practices. Specifically, the CRA asserted that the uncertainties were resolved by learning and implementing readily available technology and techniques. Whereas the claimant believed that the limitations associated with the ingredients and issues with their manufacturing process represented technological uncertainties. 

The projects fell into two categories, process improvements and recipe development. Key examples of each type were:

Process improvement (Yeast Project)

• Objectives were to increase shelf life while reducing additives without impacting taste and texture

• Initial web searches and consultation with suppliers were conducted - no notes were kept

• Supplier suggested a process to replace sodium propionate with fermented yeast - a process the supplier was working to implement with other manufacturers

• Challenges remained with how to integrate the spraying process - since the croissants were not uniformly placed on the conveyor, the yeast was not applied evenly

• External supplier installed a "magic eye" to detect the croissants

• Different yeast concentrations were trialed and shelf life was tested

• The project was abandoned due to issues and additional costs required

Recipe Development (Quinoa Project)

• Sought to adapt their existing oat biscuit recipe to create a quinoa biscuit

• Found the biscuits dried out easily 

• Limits existed regarding the amount of water that could be added

• Tried several ideas to retain moisture without affect nutrition, including: soaking the quinoa, different packaging types, ingredient contents, baking parameters

• Learned about the moisture absorption of certain ingredients - admitted they could have found articles on how quinoa reacts in water

• Achieved objectives through combination of ingredients and more water - evaluation based on taste and texture

The Ruling

The judge ruled that there was no technological uncertainty for either group of projects because the knowledge required to achieve the objectives was not limited. Knowledge in the public domain was determined to be sufficient to address the challenges. The available knowledge included the contributions of suppliers, published information on properties of the ingredients and the known effects of process parameters. The process development projects were considered even less admissible due to being focused on cost concerns. The heavy reliance on supplier solutions and lack of documentation were highlighted as key elements working against the claimant. 

While these projects had elements of SR&ED eligibility, a few key issues resulted in denial by the CRA and an unfavourable ruling from the Tax Court. This reinforces the need for food and beverage companies to:

• Identify how changes go beyond typical ingredient combinations and process parameters

• Articulate learnings about ingredient behaviours in the production context

• Document the process, including initial research showing on the limitations of available solutions; test results quantifying results ideally in a lab environment; and analysis of the underlying interactions between ingredients and process parameters

Claiming SR&ED in the food & beverage industry is challenging. Let Insight help. We specialize in building strongly supported SR&ED claims. Contact us today.