Despite a shifting landscape for Research & Development (R&D) tax credits in the UK, the opportunity they provide to innovative companies is still quite substantial, particularly for many of our clients in the renewables sector.
Unfortunately, I think that the increased scrutiny and changing requirements have caused some to view these incentives as a challenge.
However, for those in Scotland and the Islands – where there’s a significant focus on green technology – I believe that R&D tax credits continue to present an excellent chance to ease tax burdens and drive growth.
Navigating the changes: A small price for a big win
Admittedly, recent changes to the R&D tax credit scheme have led to an increase in compliance obligations, which, understandably, can be off-putting.
Indeed, it may no longer be worth submitting claims for smaller amounts of qualifying R&D spend, due to the cost of dealing with enquiries – HMRC has recently adopted a very aggressive stance in relation to R&D tax credit claims.
But claims in respect of more significant amounts of qualifying R&D spend should still be considered on their merits.
Navigating the new rules around qualifying expenditure and claim submissions – including the Additional Information Form (AIF) – adds complexity to the process.
However, these developments are not aimed at discouraging genuine claims but rather at ensuring funds are allocated where they can truly foster innovation.
In fact, if your company is engaged in developing renewable technologies or enhancing the efficiency of existing systems, the Government is still very much interested in rewarding that effort.
Whether you’re working on advancements in offshore wind technology, creating more efficient solar panels, or developing solutions to energy storage problems, these activities often fall squarely within the definition of eligible R&D.
The key is in understanding the scheme and preparing claims that clearly demonstrate the innovative work being undertaken.
In this respect, the additional compliance costs should be weighed up against the potential tax savings.
Unlocking value in green technology
Scotland has been leading the way in renewables, with wind, hydro, and marine energy all seeing significant growth.
Many businesses involved in the sector are not just contributing to a sustainable future, but also investing heavily in innovation.
The R&D tax credit scheme is designed to support innovators, specifically UK companies who are undertaking projects that seek to resolve a scientific or technological uncertainty that cannot already be solved by a competent professional working in the field.
The renewable energy sector is in an exciting phase of growth, particularly in Scotland, which has an abundance of natural resources.
But growth requires ongoing investment, and that’s where the tax savings from R&D tax credits come in.
They can help cover the costs of those extra experimental phases, trial runs, and technological advancements that are crucial for staying ahead of the competition.
With a renewed focus on net-zero goals, the Government is well aware of the importance of supporting industries that contribute to a greener future. R&D tax credits are a key part of this support framework.
Under the merged R&D tax scheme, the Research and Development Expenditure Credit (RDEC) is set at 20 per cent of the ‘above the line credit’.
The credits provide a real opportunity to reduce tax liabilities by a significant margin, allowing funds to be reinvested into your projects or used to expand your operations.
Even with the tightening of some criteria, there is still ample scope for renewable companies to make successful claims – particularly where they are tackling some of the complex technical challenges involved in developing sustainable energy solutions.
Don’t leave money on the table
Too many companies in the renewables sector still underestimate the scope of R&D tax credits or mistakenly believe that their work doesn't qualify.
If you’re solving technical uncertainties – whether it’s improving the efficiency of a tidal turbine, experimenting with new materials for solar panels, or finding innovative ways to store or distribute renewable energy – there's a strong chance you could benefit.
The key takeaway for me is that, despite recent challenges, R&D tax credits remain a valuable source of funding for green technology companies.
With the right advice and a robust approach to documenting your activities, these credits can significantly reduce your tax liabilities, freeing up funds for what really matters: continuing your vital work in renewable energy and innovation.
Don’t let the complexity put you off – your work is crucial, and the support is there to help you keep pushing the boundaries of what’s possible.
