Your company may qualify if it is subject to UK Corporation Tax and undertakes projects that seek an advance in science or technology by addressing scientific or technological uncertainties that could not readily be resolved by a competent professional in the field. Qualifying R&D can arise in developing new products, processes, materials or software, as well as making appreciable improvements to existing ones. The project does not need to succeed to qualify.
Eligibility depends on the nature of the work undertaken, rather than simply whether your business describes itself as innovative or carries out product development.
Check your R&D eligibilityFor tax purposes, R&D is more specific than everyday innovation. HMRC looks for a project seeking an advance in a field of science or technology and involving scientific or technological uncertainty. This means that a competent professional could not readily determine whether something was possible, or how to achieve it, using existing knowledge and available information.
The advance must relate to the wider field, not simply be something that is new to your company. Activities directly contributing to resolving the uncertainty, together with certain qualifying indirect activities, can potentially form part of the R&D.
Check your R&D eligibilitySoftware development can qualify for R&D tax relief where a project seeks an advance in technology and involves genuine technological uncertainty. Simply developing a new website, application, platform or implementing existing technology is not enough in itself.
Potentially qualifying projects can include work where competent software professionals cannot readily determine how to achieve the required performance, functionality, scalability, security or integration using existing knowledge and techniques. The key question is not "Is the software new?", but "What technological advance was being sought, what uncertainty prevented it being readily achieved, and how did the development team attempt to resolve that uncertainty?"
Check your R&D eligibilityYes. A project does not have to succeed to qualify for R&D tax relief. A failed or abandoned project can actually provide strong evidence that genuine scientific or technological uncertainty existed.
For example, a business might develop and test several approaches without achieving the required performance, or conclude that the intended technological solution is not currently feasible. Qualifying R&D generally begins when work starts to resolve the scientific or technological uncertainty and ends when that uncertainty is resolved or the work to resolve it stops.
The important consideration is therefore the nature of the R&D work undertaken, rather than whether the project ultimately delivered a successful commercial outcome.
Check your R&D eligibilityThe rules for contracted-out R&D changed for accounting periods beginning on or after 1 April 2024. Broadly, the company that contracts out R&D may be able to claim the qualifying contracted-out costs where the statutory conditions are satisfied.
A key question is whether it is reasonable to conclude, from the contract and the surrounding circumstances, that the customer intended or contemplated that this type of R&D would be undertaken to meet the contractual obligations. The customer does not necessarily need to carry out the R&D itself.
A contractor may be able to claim for R&D that it undertakes on its own initiative, but generally cannot claim for R&D that it carries out as part of delivering R&D contracted out to it by a customer. The contract, commercial reality, project records and the parties’ intentions should all be considered.
Check your R&D eligibilityThere is no standard fee for R&D tax relief advice. Costs vary depending on the size and complexity of the claim, the number of projects involved, the quality of the information available and the level of technical and financial support required.
Advisers may charge a fixed fee, a fee linked to the value of the benefit achieved, or a combination of the two. When comparing costs, it is important to understand exactly what is included. For example, does the fee cover project identification, technical interviews, qualifying expenditure calculations, preparation of the Additional Information Form, submission support and assistance if HMRC subsequently asks questions?
The cheapest fee does not necessarily represent the best value. The quality and defensibility of the claim, and the support provided if it is scrutinised, should also be considered.
Compare R&D adviser feesBoth approaches have advantages and disadvantages. A fixed fee provides certainty over cost and avoids the adviser's remuneration increasing simply because the value of the claim increases. However, the scope of work and what happens if additional support is required should be clearly defined.
A contingent or percentage-based fee links the adviser's remuneration to the value of the R&D benefit. This can reduce the initial cost of engaging an adviser, but percentage fees can become significant on larger claims and may create incentives to take a more aggressive approach to eligibility or qualifying expenditure.
Whichever model you choose, look beyond the headline percentage or price. Compare the scope of the service, technical expertise, quality assurance, contractual terms and whether HMRC enquiry support is included.
Compare R&D adviser feesMany accountants provide R&D tax relief services and some have substantial expertise in this area. The question is therefore not simply accountant or specialist, but whether the people preparing your claim have the appropriate tax, technical and sector knowledge.
A robust R&D claim requires an understanding of the tax rules alongside the ability to identify and explain scientific or technological advances and uncertainties. For straightforward claims, your accountant may have all the expertise required. For larger, more complex or technically demanding claims, specialist input can provide additional assurance.
If your accountant already prepares your claim, appointing a specialist does not necessarily mean replacing them. An R&D specialist can work alongside your accountant or provide an independent review of the existing approach.
Get a second opinion on your current approachA good R&D tax relief adviser should do considerably more than calculate a tax benefit. They should help identify potentially qualifying projects, understand the underlying science or technology, establish where genuine scientific or technological uncertainties arose and determine which activities and costs qualify.
The adviser should also gather appropriate evidence, interview relevant technical and financial personnel, calculate qualifying expenditure, prepare the technical narrative and support the completion of the required HMRC information and tax documentation.
Just as importantly, they should challenge areas that do not meet the qualifying criteria. The objective should be a complete, accurate and defensible claim rather than simply producing the largest possible number.
Talk to an R&D specialistLook for an adviser that combines tax expertise with an ability to understand the science or technology behind your R&D. Ask who will actually prepare the claim, what experience they have in your sector, how projects are assessed and what quality-assurance procedures are used.
You should also understand how the adviser charges, what is included in the service and what support is available if HMRC opens an enquiry. Ask how the adviser deals with projects or expenditure that it believes do not qualify, and whether it is prepared to challenge assumptions rather than simply accept everything presented to it.
The right adviser should be able to demonstrate a rigorous, evidence-based approach, communicate effectively with both your technical and finance teams and give you confidence that the resulting claim can withstand HMRC scrutiny.
Talk to an R&D specialistThe company making the R&D tax relief claim is ultimately responsible for ensuring that it is complete and correct, even where an accountant or specialist adviser prepares the claim on its behalf.
HMRC can amend or reject an incorrect claim and, depending on the circumstances, interest and penalties may also arise. Using an adviser does not transfer the company's responsibility to that adviser.
This makes it important that directors understand what is being claimed, are comfortable with the methodology used and ensure that appropriate evidence supports the claim. A good adviser should explain any areas of uncertainty or judgement rather than simply asking the company to approve a final figure.
Assess your R&D claim riskThere is no single feature that automatically makes a claim high-risk. However, HMRC scrutiny is more likely to cause problems where eligibility is unclear, the technical justification is weak, qualifying expenditure is poorly evidenced or the claim takes an overly broad interpretation of the rules.
Potential warning signs include claiming routine commercial development as R&D, difficulty identifying the scientific or technological advance and uncertainty, unusually high qualifying expenditure, weak supporting records, questionable subcontracting treatment or a technical narrative that does not reflect what actually happened.
Risk should therefore be considered throughout the preparation of the claim, rather than only after HMRC raises questions.
Assess your R&D claim riskThere is no single prescribed set of records that proves an R&D project qualifies. The strongest evidence is generally the contemporaneous information created while the work was actually taking place.
Depending on the project, this might include project plans, technical specifications, design documents, test results, prototypes, trial records, development logs, meeting notes, emails, version histories, timesheets and records of failed approaches. Financial records should also demonstrate how qualifying expenditure has been identified and calculated.
The evidence should help establish what advance was sought, what scientific or technological uncertainties existed, how competent professionals attempted to resolve them and which activities and costs related to that work.
Review the strength of your claimA strong technical report should explain why the projects included in the claim meet the definition of R&D for tax purposes. It should be written so that someone reviewing the claim can understand the technological or scientific challenge without needing detailed prior knowledge of the business.
For each representative project, it should clearly describe the relevant field of science or technology, the existing knowledge or capability, the advance being sought, the scientific or technological uncertainties encountered and the work undertaken to resolve them. It should also explain the role of competent professionals and distinguish qualifying R&D from routine development or commercial activity.
The report should be specific to what actually happened. Generic descriptions, excessive technical jargon or narratives that simply describe the commercial project without explaining the underlying R&D can weaken rather than strengthen a claim.
Review the strength of your claimYes, although you should check the terms of your existing adviser agreement before making a change. Some R&D tax relief advisers operate under contracts that include minimum terms, notice periods, exclusivity clauses, automatic renewals or provisions governing fees if the relationship is terminated early. These may affect when and how you can appoint another adviser.
Subject to your contractual position, you can appoint a new adviser to prepare future claims. A new adviser will normally want to understand your previous claims, methodology and any correspondence with HMRC before preparing the next one. This can also provide an opportunity to review how projects and qualifying expenditure have previously been identified and documented.
Changing adviser should not in itself cause a problem with HMRC. The important consideration is that each claim is complete, accurate and supported by appropriate evidence.
Review your adviser optionsYou might consider changing adviser if you are no longer confident in the quality, technical rigour or level of support you receive.
Warning signs could include limited engagement with your technical teams, generic technical reports, insufficient challenge over eligibility or expenditure, unexplained changes in claim value, poor communication, unexpected fees or inadequate support when HMRC raises questions.
A change may also be appropriate because your business has evolved. More complex R&D, larger claims, international activities or increased HMRC scrutiny may mean you require a different level of specialist expertise.
Before deciding to move, however, review your existing contract carefully. You may be subject to a notice period, minimum contract term, exclusivity provision, automatic renewal or termination charges. Understanding these obligations will help establish when you can move and whether there are any financial or practical implications.
Even where you are contractually committed to an existing adviser, you may still be able to obtain an independent second opinion or review, although the terms of your agreement should be checked first.
Review your adviser optionsYes. An independent review can assess whether a previous or current claim has been prepared using an appropriate methodology and whether the technical and financial evidence adequately supports it.
The review might consider project eligibility, the identification of scientific or technological advances and uncertainties, qualifying expenditure, subcontracting arrangements, technical documentation and consistency with the information submitted to HMRC.
The purpose should not simply be to find additional expenditure to increase the claim. A good review should identify both potential omissions and areas of unnecessary risk, giving you a clearer view of the overall robustness of the claim.
Request an independent claim reviewYes. A second opinion can be useful if you are uncertain about eligibility, concerned about the approach taken by your existing adviser or accountant, or simply want additional assurance before submitting a significant or complex claim.
An independent specialist can review the technical basis of the claim, qualifying expenditure, supporting evidence and the way the position has been presented to HMRC.
Importantly, obtaining a second opinion does not mean you have to change adviser. It can provide an independent assessment of whether the claim is reasonable, well evidenced and defensible, allowing you to decide whether any changes are needed before proceeding.
Request an independent claim reviewIf HMRC opens an enquiry, it will normally ask questions or request further information to establish whether the claim meets the requirements of the R&D tax relief legislation. This may involve examining the scientific or technological basis of the projects, qualifying expenditure, subcontracting arrangements and evidence supporting the claim.
HMRC may issue several rounds of questions, and responses should address the points raised clearly and accurately, supported by appropriate technical and financial evidence.
An enquiry does not automatically mean that a claim is incorrect. HMRC may ultimately accept the claim as submitted, agree adjustments with the company, or conclude that some or all of the claim does not qualify. Where appropriate, decisions can also be challenged through the available review and appeal processes.
Discuss your HMRC enquiryThere is no fixed timescale. An R&D enquiry can potentially be resolved within a few months, while more complex cases may take considerably longer, particularly where there are multiple rounds of correspondence, complex technical issues or disagreement over eligibility or expenditure.
The quality and completeness of the original claim and the company's ability to provide clear evidence can affect how straightforward the process is. Responding promptly and comprehensively to HMRC's questions can also help avoid unnecessary delays.
Businesses should therefore avoid assuming that an enquiry will be resolved quickly and should consider the potential impact on tax, cash flow and internal management time.
Talk to an R&D specialistIdeally, you should understand before appointing an adviser what support they will provide if HMRC subsequently challenges the claim.
An adviser that prepared the claim is usually well placed to help because it should understand the projects, calculations and reasoning behind the submission. However, enquiry support is not necessarily included within every R&D advisory agreement. Some advisers include it within their standard fee, while others charge separately or limit the amount of support provided.
Check your engagement terms carefully to understand what is included, whether there are additional charges and how far the adviser will support the enquiry.
If you are not confident in the original claim or the adviser that prepared it, you can also seek independent specialist support to review the position and assist with the HMRC enquiry.
Talk to an R&D specialistThere is no standard cost. It will depend on the complexity of the enquiry, the number and nature of HMRC's questions, the quality of the original claim and supporting evidence, and how long the enquiry continues.
Some R&D advisers include enquiry defence within their original fee or offer a defined level of support. Others charge separately, potentially using fixed fees, hourly or daily rates, or staged fees as the enquiry progresses.
Before appointing an R&D adviser, it is therefore worth asking what would happen if HMRC opened an enquiry, exactly what support is included and what additional costs could arise.
If an enquiry is already under way, the scope and likely cost of defence should ideally be agreed after an initial review of the claim, HMRC correspondence and supporting documentation, so that both the business and adviser understand the work likely to be required.
Discuss your HMRC enquiryNot every capital allowances claim requires a specialist. However, specialist input can be particularly valuable when you buy, build, extend, refurbish or fit out commercial property, where qualifying expenditure can be embedded within the overall project cost and may not be obvious from the accounts. A specialist can analyse construction costs, specifications and property information to identify qualifying plant, machinery, fixtures and integral features, and determine which allowances are available. The objective should be to identify the relief to which you are entitled while ensuring that the claim is appropriately evidenced and defensible.
Talk to a capital allowances specialistYour accountant may have considerable capital allowances expertise and will often identify straightforward expenditure on equipment and machinery. Property-related claims can be more complex because qualifying assets may be embedded within construction, refurbishment or acquisition costs. Identifying these can require detailed analysis of building plans, specifications, cost schedules and fixtures. A capital allowances specialist can therefore work alongside your accountant, providing the property and technical analysis needed to support the tax treatment.
Talk to a capital allowances specialistThere is no standard fee. The cost will depend on factors such as the size and complexity of the property, the nature of the expenditure, the records available and the scope of the review. Advisers may charge a fixed fee or, in some cases, a fee related to the value of allowances identified. When comparing fees, consider the scope of the work, the level of technical analysis undertaken, the supporting documentation provided and whether assistance with HMRC queries is included.
Request a capital allowances quotePotentially, yes. Although the purchase price of the building itself does not generally qualify for plant and machinery allowances, part of the price may relate to qualifying fixtures and integral features, such as heating, electrical and air-conditioning systems. However, special rules apply when acquiring a property containing fixtures from another business. The seller's previous claims, pooling of expenditure and the agreed value attributed to fixtures can affect what the purchaser can claim. Capital allowances should therefore ideally be considered before the property transaction is completed, rather than afterwards.
Request a property allowances reviewPotentially. If qualifying expenditure was not fully identified when it was incurred, it may be possible to review historic expenditure and claim allowances that remain available. The position depends on factors including what was purchased, when the expenditure was incurred, whether allowances have already been claimed and, for acquired properties, the history and treatment of fixtures. Historic property expenditure can therefore be worth reviewing, but the circumstances need to be considered carefully before assuming unclaimed allowances remain available.
Request a property allowances reviewSelling a property can affect capital allowances already claimed and the allowances available to the purchaser. Where fixtures are involved, the seller and buyer may need to agree the value attributed to them, commonly through a section 198 election. The seller may also need to bring a disposal value into its capital allowances calculation, which can result in a balancing adjustment. Capital allowances should therefore form part of the tax due diligence for a commercial property sale rather than being considered only after completion.
Review allowances before you sellCapital allowances can be available on capital expenditure on plant and machinery used for the purposes of a qualifying business activity. This can include obvious assets such as machinery and equipment, but also fixtures and systems incorporated into buildings. Buildings and land themselves do not generally qualify for plant and machinery allowances, although separate relief may be available under the Structures and Buildings Allowance. What qualifies depends on the asset, how it is used and the circumstances in which the expenditure was incurred.
Check what expenditure qualifiesIntegral features are certain systems incorporated into a building that are specifically treated as plant and machinery for capital allowances purposes. They include electrical and lighting systems, space and water heating systems, air-conditioning and air-cooling systems, hot and cold water systems, lifts and escalators, and external solar shading. Integral features are generally special-rate expenditure, so identifying them correctly can affect both the amount and timing of the tax relief available.
Check what expenditure qualifiesBoth can provide substantial upfront tax relief, but they operate differently. The Annual Investment Allowance (AIA) provides 100% relief on qualifying plant and machinery expenditure up to an annual limit of £1 million and is available to qualifying businesses, subject to the rules. Full Expensing allows companies within the charge to Corporation Tax to claim 100% relief on qualifying new and unused main-rate plant and machinery, with no equivalent £1 million expenditure cap. Where expenditure could qualify for more than one allowance, businesses can choose how to allocate their claims. The best approach will depend on the type and amount of investment, the assets involved and the company's tax position.
Review your capital investmentThe 40% First-Year Allowance applies to qualifying expenditure incurred on or after 1 January 2026. It allows a business within the charge to Corporation Tax or Income Tax to claim an immediate deduction equal to 40% of the cost of qualifying new and unused main-rate plant and machinery.
Cars and expenditure that is excluded under the capital-allowance rules do not qualify. The allowance is separate from the Annual Investment Allowance and Full Expensing, so the most appropriate treatment will depend on the asset, the business’s tax position and whether another allowance provides a better result.
The remaining expenditure is dealt with under the applicable capital-allowance rules. Businesses should therefore avoid assuming that the balance will always receive a particular rate or treatment in the following accounting period.
Review your capital investmentYes, in some circumstances. A UK property business is a qualifying activity for plant and machinery allowances, and commercial landlords may be able to claim on qualifying fixtures and plant within their properties.
There are, however, important restrictions for plant and machinery used in dwelling-houses. Qualifying expenditure in communal areas of some residential buildings may still be eligible, but the position can differ significantly between commercial, mixed-use and residential property.
The availability of allowances may also depend on the history of the fixtures, previous claims and the treatment agreed when the property was acquired
Check what expenditure qualifiesA review is particularly worth considering when your business is buying or selling commercial property, undertaking a major refurbishment or fit-out, constructing or extending premises, or making significant investment in plant and machinery.
It can also be worthwhile reviewing historic property expenditure where you are unsure whether all available allowances were identified. For an acquisition or disposal, decisions made during the transaction can directly affect the allowances available afterwards, particularly where fixtures are involved.
Ideally, specialist advice should be obtained early enough to influence the transaction structure, records and contractual documentation. Review your capital allowances position before committing to the project where possible.
Request a capital allowances reviewYour company may qualify for Land Remediation Relief (LRR) if it incurs expenditure on remediating contaminated or qualifying derelict land in the UK for the purposes of its trade or property business. For contaminated land, the contamination will normally need to result from previous industrial activity, although specific exceptions include Japanese knotweed, radon and arsenic. The company or a connected party must not generally have caused the contamination, reflecting the "polluter pays" principle. Eligibility depends on the land, its history, the nature of the contamination or dereliction and the expenditure incurred, so each project needs to be considered on its particular facts.
Check your site's eligibilityLand Remediation Relief can provide an additional 50% Corporation Tax deduction for qualifying remediation expenditure, on top of the normal 100% deduction where the expenditure is otherwise deductible. This means that qualifying revenue expenditure can potentially receive a total deduction of 150%.
For example, £100,000 of qualifying expenditure could potentially produce £150,000 of tax deductions. The actual benefit depends on the nature and timing of the expenditure, the company’s tax position and whether the expenditure is revenue or capital for tax purposes.
A loss-making company may, subject to the relevant conditions, surrender qualifying land-remediation losses for a payable tax credit equal to 16% of the qualifying loss surrendered. The credit is not an automatic percentage of all remediation expenditure, and detailed rules determine the amount of loss that can be surrendered.
Estimate your potential LRR benefitQualifying expenditure can include costs incurred because land is contaminated or derelict, including relevant staffing costs, materials and payments to qualifying subcontractors. Depending on the circumstances, costs associated with establishing the extent of contamination, professional fees, preparatory activity and carrying out the remediation itself can also qualify. However, the expenditure must meet the detailed conditions. Subsidised expenditure and Landfill Tax, for example, are excluded. Separating qualifying remediation costs from wider construction or development expenditure is therefore an important part of preparing a claim.
Check your site's eligibilityYes. Property developers can potentially claim LRR where they acquire contaminated or qualifying derelict land and incur eligible remediation expenditure as part of the development. The treatment can differ from that of an owner-occupier or property investor because development expenditure may be held as trading stock or work in progress, affecting when the expenditure is recognised for tax purposes and when the relief is obtained. The polluter-pays and other eligibility rules still apply. For developers, identifying qualifying costs as the project progresses can be particularly valuable because separating them from wider construction expenditure retrospectively can be difficult.
Check your site's eligibilityPotentially, yes. A corporate landlord can claim LRR where qualifying contamination was already present when it acquired the property, subject to the other conditions being satisfied. However, a landlord cannot normally claim relief for cleaning up contamination caused by one of its tenants. For example, a landlord acquiring a previously contaminated industrial site may potentially qualify when it later remediates that historic contamination, whereas contamination arising from the activities of its own tenant can fall outside the relief.
Check your site's eligibilityFor LRR purposes, land is broadly considered contaminated where something in, on or under it is causing relevant harm, or there is a serious possibility that it will do so. The contamination will normally need to have arisen from previous industrial activity. Relevant harm can include significant adverse effects on human or animal health and damage to buildings that materially affects their use. Specific rules also bring certain naturally occurring contaminants and Japanese knotweed within the relief. The tax definition should therefore be considered separately from simply describing a site as "brownfield" or contaminated in everyday terms.
Check your site's eligibilityIt can. Expenditure on dealing with asbestos may qualify where the asbestos causes the land or building to meet the relevant contamination conditions and the expenditure satisfies the wider LRR rules. Qualifying costs can extend beyond the straightforward cost of removing the asbestos to certain additional costs incurred specifically because of the contamination. However, not every asbestos-related cost automatically qualifies, so it is important to distinguish remediation expenditure from ordinary demolition, refurbishment or construction costs. HMRC specifically includes additional costs of clearing asbestos within its detailed LRR guidance.
Check your site's eligibilityYes, subject to the conditions. Japanese knotweed is specifically brought within the scope of LRR even though living organisms are generally excluded. However, the method used to deal with it matters. Since 1 April 2009, expenditure on removing Japanese knotweed to landfill is excluded, while qualifying in-situ treatment and treatment at off-site treatment centres can continue to qualify. Relief can also be denied where the company is treated as responsible for allowing the infestation to spread.
Check your site's eligibilityPotentially, yes. If qualifying expenditure was incurred but LRR was not claimed, it may be possible to amend the relevant Corporation Tax return or make a supplementary claim, provided the company is still within the applicable statutory time limit. Timing can be more complicated than simply looking at when the remediation work took place, particularly for property developers where expenditure may initially be held in work in progress and recognised later. Historic expenditure is therefore worth reviewing, but the relevant accounting periods, tax returns and claim deadlines should be checked before assuming a retrospective claim remains available.
Check for unclaimed LRRThere is no requirement to use a specialist, and your accountant may already have the necessary expertise. However, LRR claims can require a combination of tax, property, environmental and construction-cost analysis. A specialist can help determine whether the land qualifies, apply the polluter-pays rules, identify eligible remediation activity and separate qualifying expenditure from the wider development or construction costs. This can be particularly useful on larger or more complex projects where remediation expenditure is spread across contractors, professional fees and construction packages. The objective should be to identify the relief legitimately available while ensuring that the claim is appropriately evidenced and defensible.
Talk to an LRR specialistYour company may qualify for Patent Box if it is subject to UK Corporation Tax, owns or exclusively licenses qualifying patent rights, has undertaken qualifying development in relation to the patented invention, and generates relevant income from exploiting those rights. For companies that are members of a group, additional active ownership requirements can apply. Importantly, simply owning a patent is not enough. There needs to be an appropriate connection between the company, the development activity and the profits generated from the qualifying intellectual property.
Check your Patent Box eligibilityPotentially, particularly where a company generates significant profits from products, processes or services connected with qualifying patents. Patent Box effectively applies a 10% Corporation Tax rate to qualifying Patent Box profits, compared with the main Corporation Tax rate of 25% for companies within that rate. The benefit therefore has the potential to be substantial. Whether Patent Box is worthwhile will depend on factors including the amount of relevant IP income, profitability, R&D expenditure, the nexus fraction and the administrative work required to calculate and support the claim.
Estimate your Patent Box opportunityThe potential saving depends on the amount of profit attributable to qualifying intellectual property. Patent Box provides an effective 10% Corporation Tax rate on qualifying Patent Box profits, so companies paying Corporation Tax at the 25% main rate can potentially achieve a significant reduction in tax on those profits. However, the calculation is more complex than simply applying a 15 percentage-point saving to all profits associated with a patented product. Relevant IP income must be identified and adjusted, and the nexus fraction can restrict the benefit. A Patent Box calculation or opportunity assessment can help establish the likely value before making an election.
Estimate your Patent Box opportunityA company must generally elect into Patent Box within two years after the end of the accounting period in which the relevant profits and income arose. It is sensible to consider the election earlier, particularly where the company expects to generate relevant IP profits or has several patents, products or income streams to track.
Where a qualifying patent application is subsequently granted, special rules may allow qualifying profits arising between the application and grant dates to be brought into the Patent Box calculation. This is not automatic: the relevant conditions, elections, time limits and tracking requirements must be satisfied.
The treatment of pre-grant profits is generally dealt with in the accounting period in which the patent is granted, rather than by treating the profits as automatically receiving the reduced rate in each earlier period. Companies with pending applications should therefore obtain advice before assuming that pre-grant profits will qualify.
Review your Patent Box timingPotentially, but software itself does not automatically qualify. Computer programs "as such" are not generally patentable in the UK or through the European Patent Office. However, a software-based invention that provides a patentable technical solution to a technical problem can potentially be patented. Where a company holds or exclusively licenses a qualifying patent covering the software-based invention, income associated with exploiting that patented technology may potentially fall within Patent Box, subject to the other conditions. This makes the scope and wording of the underlying patent particularly important.
Check your Patent Box eligibilityNo. A company can potentially qualify if it owns the qualifying patent or holds an appropriate exclusive licence over it. The company must also satisfy the qualifying development requirements and the other Patent Box conditions.
An exclusive licence needs to provide genuine and substantial rights to exploit the patented invention. A licence described commercially as “exclusive” may not be sufficient if it provides only exclusive distribution or resale rights without the required rights over the patented technology.
Group structures can add further complexity where one company undertakes the development, another owns or licenses the patent and a third exploits the resulting product. These arrangements should be reviewed carefully before making a Patent Box claim.
Check your Patent Box eligibilityYes, provided the licence meets the Patent Box requirements for exclusivity. Broadly, the company must have genuine and substantial exclusive rights to exploit the patented invention, rather than simply an exclusive distribution or resale arrangement. Exclusivity can potentially relate to a particular territory or field of use, but the detailed terms of the agreement matter. Rights concerning enforcement of the patent are also relevant. Licence agreements should therefore be reviewed carefully rather than assuming that an agreement described commercially as "exclusive" automatically qualifies for Patent Box.
Check your Patent Box eligibilityR&D tax relief and Patent Box can complement one another. R&D tax relief supports the cost of undertaking qualifying research and development, while Patent Box can reduce the Corporation Tax payable on qualifying profits generated from resulting patented innovations. A company may therefore benefit from R&D tax relief during development and Patent Box as the resulting technology becomes commercially successful. R&D activity is also important within the Patent Box calculation because the nexus rules link the level of Patent Box benefit to the company's qualifying R&D expenditure associated with the relevant IP.
Review your R&D and Patent Box positionThe nexus fraction is designed to ensure that Patent Box benefits are linked to the R&D activity undertaken by the company in developing the qualifying intellectual property. Broadly, it compares qualifying R&D expenditure with the company's overall expenditure on developing or acquiring the relevant IP. Where the company undertakes its own R&D, or uses unrelated parties to do so, the fraction may be high and Patent Box benefits may be unrestricted. Significant expenditure on acquiring IP or outsourcing R&D to connected parties can reduce the proportion of relevant IP profits eligible for the Patent Box benefit.
Review your nexus positionThere is no requirement to use a specialist, and your accountant or tax adviser may already have the necessary expertise. However, Patent Box calculations can become complex, particularly where a business has multiple patents, several product lines, embedded patented technology, international R&D, acquired IP or connected-party arrangements. Specialist support can help establish eligibility, identify relevant IP income, calculate the nexus fraction and determine the appropriate Patent Box deduction. It can also be valuable before a patent is granted, helping the business understand the potential tax value of its IP and put appropriate record-keeping arrangements in place.
Talk to a Patent Box specialistYou do not need to use a consultant to apply for innovation funding, and many businesses successfully prepare applications themselves. A specialist can be particularly valuable where the competition is highly competitive, the funding opportunity is significant, the application is complex or your internal team has limited experience or capacity. A good consultant should do more than write the application. They should help assess whether the opportunity is genuinely right for your project, develop the funding strategy, challenge the proposition and ensure that the technical, commercial and financial case is presented clearly and convincingly.
Talk to a grant specialistThere is no standard fee. Costs depend on the complexity of the competition, size of the project, amount of funding sought and level of support required. Consultants may charge a fixed application fee, a success-related fee, or a combination of the two. When comparing fees, consider what is actually included, such as opportunity identification, eligibility assessment, bid strategy, application development, financial modelling, partner support, submission and post-award assistance. The cheapest option is not necessarily the best value if the funding opportunity is strategically important or highly competitive.
Discuss grant support and feesLook for a consultant with experience of the funding programme, sector and type of project you are pursuing. Ask about their track record, but do not rely solely on headline success rates, which can be calculated in different ways. Understand who will actually work on your application, how much input will be required from your team and how the consultant assesses whether a project is genuinely competitive before accepting an engagement. A good consultant should be prepared to challenge the project and advise against applying where the opportunity or timing is not right.
Talk to a grant specialistA grant consultant can support the entire funding journey, from identifying appropriate opportunities and assessing eligibility through to developing the proposition, preparing the application and supporting post-award delivery. This can include reviewing competition requirements, developing the project structure, coordinating consortium partners, drafting and reviewing technical and commercial responses, preparing project costs and helping ensure that the application addresses the funder's assessment criteria. The consultant should strengthen and articulate your project, rather than inventing a project simply to fit a funding call.
Talk to a grant specialistA good consultant can improve the quality and competitiveness of an application, but no reputable adviser should guarantee that funding will be awarded. Innovation grants are often competitive and applications are assessed against other projects as well as the published criteria. An experienced consultant can help identify weaknesses, ensure that questions are answered effectively, strengthen the business and technical case and avoid common application errors. Just as importantly, they can help determine whether you should apply at all, avoiding significant time being spent on opportunities where the project is unlikely to be competitive.
Review your grant applicationSuccess fees are one legitimate way of paying for grant support, but they should be considered alongside the overall service and fee structure. They can align part of the consultant's remuneration with a successful outcome and reduce the upfront cost of applying. However, a percentage-based fee can become substantial on larger awards. Before appointing an adviser, understand how the success fee is calculated, when it becomes payable, whether there is also an upfront fee and what happens if the award differs from the amount requested. The charging model should not encourage an adviser to recommend an unsuitable application simply because a fee depends on success.
Discuss grant support and feesApplications can be unsuccessful for many reasons. Common weaknesses include poor alignment with the competition scope, insufficient evidence of innovation, an unclear market need, weak commercialisation plans, unrealistic project costs, inadequate consideration of risks or an unconvincing explanation of why public funding is needed. Strong technology alone is not enough. Assessors need to understand the problem, innovation, project plan, team, market opportunity, impact and value for money. Competition is also important: a credible project can meet the basic requirements and still be unsuccessful if other applications score more highly.
Review your grant applicationThe timetable varies considerably between competitions. Businesses need to allow time not only for completing the application but also for developing the project, confirming partners, preparing budgets and gathering the supporting information required. After the competition closes, applications are assessed and applicants are subsequently informed of the outcome. Successful applicants then normally go through further checks and grant set-up before the project can begin. You should therefore work backwards from the competition deadline and avoid leaving project development and application preparation until the final few days.
Check current funding opportunitiesYes. SMEs are an important audience for many Innovate UK funding programmes, although eligibility varies from one competition to another. Some opportunities are specifically aimed at start-ups or SMEs, while others are open to businesses of different sizes or require collaborative projects involving companies, universities or research organisations. The amount and proportion of project costs that can be funded can also depend on company size, type of research and competition rules. Eligibility should therefore be checked against the requirements of the individual funding call.
Check current funding opportunitiesPotentially, yes, but the interaction needs to be considered carefully. Receiving grant funding does not necessarily prevent a company from benefiting from R&D tax relief, although the nature of the subsidy, the expenditure being funded and the applicable R&D tax regime can affect the treatment. The rules have changed significantly under the merged R&D scheme, so assumptions based on the previous SME and RDEC regimes may no longer be appropriate. Ideally, the interaction between grant funding and R&D tax relief should be considered when developing the funding strategy rather than only after the grant has been awarded.
Review your grant and R&D strategyWinning the grant is the beginning of the funded project rather than the end of the process. Before the project starts, there may be due-diligence, financial and grant set-up requirements. During delivery, the business will normally need to monitor project progress, maintain appropriate financial and technical records, submit claims and reports and demonstrate that expenditure relates to the approved project. Changes to scope, timing, costs or project partners may also need approval. Good grant management is important because inadequate records or failure to meet funding conditions can delay payments or put funding at risk.
Discuss post-award grant supportIt depends on your project, objectives, stage of development, funding requirement and appetite for collaboration. UK programmes such as Innovate UK can be attractive for businesses developing and commercialising innovation in the UK. European programmes, including Horizon Europe and EIC opportunities, can offer substantial funding and access to international partners and markets, but applications can be more complex and highly competitive. The best approach is not necessarily to choose UK or European funding in isolation. Businesses with a strong innovation pipeline should consider a broader funding strategy that identifies the most appropriate programmes for different projects and stages of development.
Explore UK and European fundingAn IP strategy can be valuable for any business where innovation, technology, brands, designs, data, know-how or other intellectual assets contribute to competitive advantage. It should identify the IP the business creates and uses, how it should be protected, who owns it and how it supports wider commercial objectives. An effective strategy is not simply about obtaining patents or registering trade marks. It should help the business decide where protection is worthwhile, where confidentiality may be more appropriate, how IP risks should be managed and how intellectual assets can be used to support growth and value creation.
Review your IP strategyAn IP audit can be particularly valuable when a business is growing, developing new products or technology, entering new markets, raising investment, acquiring or selling a business, preparing for a transaction or reviewing its innovation strategy. It can also be worthwhile where IP has developed organically over several years without a structured review. The audit helps establish what intellectual assets exist, who owns them, how they are protected and whether there are important gaps or risks. It can provide the foundation for a broader IP strategy.
Request an IP auditThere is no standard cost. The fee will depend on factors such as the size of the business, breadth and complexity of its IP portfolio, number of products or technologies, territories involved and depth of analysis required. A focused review of a smaller business may be relatively straightforward, while an audit involving multiple technologies, patents, brands, contracts and international operations can require considerably more work. When comparing costs, consider the scope of the audit and the practical outputs you will receive, rather than simply the headline fee.
Request an IP audit quoteAn IP audit typically identifies and reviews the intellectual assets used or created by the business. These can include patents, trade marks, registered and unregistered designs, copyright, software, databases, confidential information, trade secrets, technical know-how and contractual IP rights. The review should consider ownership, protection, licences, employee and contractor arrangements and potential gaps or risks. A useful audit should go beyond producing an inventory. It should prioritise the IP that matters commercially and recommend practical actions to protect, manage and exploit it.
Request an IP auditEstablishing ownership can be more complicated than identifying who created something. IP may have been developed by employees, founders, contractors, consultants, universities, suppliers or collaboration partners, and different rules or contractual arrangements can apply. Businesses should review employment and consultancy agreements, development contracts, licences, collaboration agreements and records relating to registered rights. An IP audit can help establish what the business owns, what it licenses from others and where ownership is uncertain. Resolving these issues early can be particularly important before investment, fundraising, acquisition or sale.
Request an IP auditA patent can provide powerful protection for an invention, but patenting is not automatically the right approach for every innovation. Consider whether the invention is patentable, commercially important, likely to be copied and capable of generating sufficient value to justify the cost of obtaining and maintaining protection. Patent applications also involve disclosing details of the invention publicly, which may make confidentiality or trade-secret protection preferable in some circumstances. Timing is critical because publicly disclosing an invention before filing a patent application can seriously affect the ability to obtain protection.
Discuss how to protect your innovationNeither is inherently better. A patent can provide a legally enforceable monopoly for a limited period in return for publicly disclosing the invention. A trade secret can potentially remain protected indefinitely, but only while the information remains secret and appropriate measures are taken to protect it. The right approach depends on factors such as whether the innovation can be reverse-engineered, how long it is likely to remain commercially valuable, the cost of patent protection and the risk of competitors independently developing the same solution. Some businesses use a combination of patents and trade secrets across different elements of the same technology.
Discuss how to protect your innovationPatent landscaping is the systematic analysis of patent information within a particular technology, market or competitive area. It can show who is filing patents, where activity is concentrated, how technologies are developing and where there may be gaps or opportunities. Businesses can use patent landscaping to understand competitors, inform R&D priorities, identify potential partners or acquisition targets and help avoid investing in areas already heavily protected by others. It can therefore be a useful strategic tool for innovation and commercial decision-making, rather than simply a legal exercise.
Explore your patent landscapeIP should be reviewed as the business evolves rather than treated as a one-off exercise. Particularly useful trigger points include launching new products, recruiting technical teams, using external developers, entering collaborations, expanding internationally, raising finance, acquiring another business or preparing for investment or sale. Rapidly growing businesses can create valuable IP faster than their processes for identifying and protecting it develop. Regular reviews can help ensure that ownership is clear, important assets are protected and new commercial or competitive risks are identified early.
Review your IP strategyWell-managed IP can strengthen competitive advantage, protect margins, create barriers to entry and provide additional opportunities for licensing, collaboration and commercialisation. It can also give investors or potential acquirers greater confidence that the technology, brand or know-how underpinning the business is genuinely owned and appropriately protected. Patented technology may additionally create opportunities for Patent Box tax relief. The value does not come simply from accumulating registrations or patents, however. IP creates value when it protects commercially important assets and is aligned with the company's wider business, innovation and growth strategy.
Explore the value in your IPYou may benefit from specialist transfer pricing advice if your business has transactions between companies in the same international group, such as the sale of goods, provision of services, loans, royalties or the use of intellectual property. Transfer pricing rules broadly require these transactions to be priced as they would be between independent parties. Specialist support can help establish an appropriate methodology, benchmark pricing, prepare supporting documentation and reduce the risk of challenge by tax authorities. Advice can be particularly valuable when entering new markets, restructuring a group or introducing significant new intercompany arrangements.
Talk to a transfer pricing specialistAn international group with significant intercompany transactions should generally have a clear and consistently applied transfer pricing policy. The policy explains how transactions between connected companies are priced and why that approach reflects the arm's-length principle. It can cover areas such as management services, financing, distribution, manufacturing, royalties and intellectual property. A documented policy also helps different group companies apply the same methodology consistently and provides a framework for demonstrating the commercial rationale for the arrangements if they are reviewed by a tax authority.
Review your transfer pricing policyUK businesses with transactions involving connected parties should consider whether they are within the transfer pricing rules and what documentation they need to support their position. The precise requirements depend on factors including the size and structure of the group, nature and value of the transactions and countries involved. Larger multinational groups can be subject to specific requirements for master files, local files and, where applicable, Country-by-Country Reporting. Even where a business is exempt from formal requirements, maintaining proportionate evidence supporting significant intercompany pricing can be valuable if HMRC subsequently asks how the arrangements were determined.
Check your documentation requirementsTransfer pricing documentation should explain the commercial relationships between connected companies, the transactions taking place, the functions performed, assets used and risks assumed by each party, and how the pricing methodology was selected. Depending on the circumstances, it may include agreements, financial information, benchmarking studies, details of intellectual property and analysis of comparable independent transactions or businesses. The objective is not simply to create a compliance document. The documentation should provide a coherent explanation of why the group's actual pricing reflects the economic substance of its activities and the arm's-length principle.
Check your documentation requirementsThere is no standard fee. The cost depends on the size and complexity of the group, number and type of intercompany transactions, countries involved and level of analysis or documentation required. A review of a relatively straightforward intercompany service arrangement may require considerably less work than developing policies, benchmarking and documentation for a multinational group with financing, manufacturing and valuable intellectual property. When comparing advisers, businesses should therefore consider the scope of work, countries covered, benchmarking requirements and ongoing support rather than comparing headline fees alone.
Discuss scope and transfer pricing costsA master file provides a high-level overview of a multinational group's global business, organisational structure, activities, intellectual property, financing and overall transfer pricing policies. A local file provides more detailed information about the relevant entity and its material transactions with other group companies, including the transfer pricing methodology and supporting analysis. Together, they allow tax authorities to understand both the wider group structure and how specific transactions affecting the local company have been priced. Whether they are required depends on the applicable transfer pricing and documentation rules.
Check your documentation requirementsIf HMRC or another tax authority challenges your transfer pricing, it may request information and documentation to understand how intercompany prices were established and whether they reflect the arm's-length principle. If the authority concludes that profits have been incorrectly allocated, it can potentially make a transfer pricing adjustment, increasing taxable profits and potentially giving rise to additional tax, interest and penalties. Where more than one country taxes the same profit, mechanisms may be available to seek relief from double taxation. Strong contemporaneous documentation and a clearly applied transfer pricing policy can significantly improve the business's ability to explain and defend its position.
Discuss your transfer pricing challengeIntellectual property can be particularly important in transfer pricing because valuable patents, software, technology, brands and know-how may generate substantial profits across an international group. It is not enough simply to identify which company legally owns the IP. Transfer pricing analysis also considers which entities perform the functions and assume the risks associated with developing, enhancing, maintaining, protecting and exploiting it, often referred to as DEMPE functions. The resulting analysis can affect royalties, licence fees and the allocation of profits between group companies. IP ownership and transfer pricing should therefore be considered together when structuring international innovation activities.
Review your IP and transfer pricingTransfer pricing should be reviewed regularly and whenever there is a significant change to the business. Trigger events include entering a new country, acquiring or disposing of a company, restructuring operations, transferring intellectual property, introducing new intercompany services or financing, changing supply chains or experiencing substantial changes in profitability. Groups should also consider whether existing policies continue to reflect what actually happens operationally. A transfer pricing policy that was appropriate several years ago may no longer be defensible if the functions, assets, risks or commercial relationships within the group have changed.
Review your transfer pricing policyYes. For international businesses undertaking R&D, capital investment or other innovation activity across multiple jurisdictions, a coordinated approach can help identify tax incentives, grants and other funding opportunities available in each country while maintaining oversight at group level. This can reduce duplication, improve consistency and help the group decide where different innovation activities and investments may be supported. It can also be valuable where incentives interact with transfer pricing, IP ownership or international tax arrangements. The adviser should combine local knowledge of individual incentive regimes with the ability to coordinate the overall international strategy.
Review your international incentivesNot every business needs external ESG support. A consultant can be particularly useful where you need to develop an ESG or responsible business strategy, respond to customer or investor requirements, prepare for sustainability reporting, measure emissions or establish a credible net-zero plan. External support can also provide specialist expertise or additional capacity that may not exist internally. The objective should not be to create ESG activity for its own sake, but to identify the environmental, social and governance issues that genuinely matter to the business and its stakeholders and develop a practical approach to managing them.
Talk to an ESG specialistThere is no standard fee. Costs depend on the scope and complexity of the work, size of the organisation, availability of data and level of specialist input required. A focused assessment or carbon-footprint exercise will generally require less work than developing a comprehensive ESG strategy, reporting framework or multi-year net-zero programme. When comparing proposals, businesses should consider what is included, the outputs they will receive and the level of implementation support provided. A clearly defined initial assessment can often help establish priorities before committing to a larger programme.
Discuss your ESG requirements and costsA good ESG consultant should help you understand your current position, identify the issues that matter most and translate them into practical priorities, measurable objectives and an achievable action plan. Depending on your requirements, this might include ESG assessment, stakeholder and materiality analysis, carbon measurement, sustainability reporting, net-zero planning, governance, policies and performance indicators. The consultant should also help build internal capability rather than creating unnecessary dependence on external support. The outcome should be an approach that is proportionate to your business and connected to its wider commercial strategy.
Talk to an ESG specialistMany businesses use a combination of internal ownership and external expertise. ESG is most effective when it is embedded within the business rather than owned entirely by an external adviser, so responsibility for implementation should normally remain internally. A consultant can provide specialist knowledge, independent challenge, additional capacity and support in areas such as carbon accounting, reporting requirements or strategy development. The right balance depends on your organisation's size, internal expertise, regulatory exposure and ambitions. External support can be particularly valuable in establishing the framework before responsibility progressively moves to internal teams.
Review your ESG capabilityThat depends on your size, corporate structure, listing status and the sustainability reporting requirements that apply to your organisation. However, statutory reporting is only part of the picture. Businesses are increasingly being asked for sustainability information by customers, investors, lenders and larger organisations within their supply chains. A company that is not directly subject to mandatory reporting may therefore still face significant commercial pressure to provide credible environmental and sustainability data. It is worth assessing both your formal reporting obligations and the information your key stakeholders are likely to require.
Check your reporting requirementsA credible net-zero strategy starts with understanding your current emissions rather than simply setting a distant target. The business should establish an appropriate greenhouse-gas emissions baseline, understand the main sources of emissions and identify realistic opportunities to reduce them. From there, it can set measurable targets, assign responsibilities and develop a phased reduction plan covering areas such as energy, buildings, transport, procurement and supply chains. Progress should be measured and reported regularly. The emphasis should be on genuine emissions reductions, with any use of offsets considered carefully rather than used as a substitute for reducing emissions within the business and value chain.
Build your net-zero roadmapScope 3 covers indirect emissions across your wider value chain, potentially including purchased goods and services, capital goods, transport, business travel, employee commuting, waste, use of sold products and other upstream and downstream activities. For many businesses, Scope 3 represents the largest part of their carbon footprint but can also be the most difficult to measure because much of the required information sits with suppliers and customers. A practical approach is to identify the most material categories, establish an initial baseline using the best available data, improve data quality over time and work with key suppliers and partners on targeted reduction initiatives.
Review your Scope 3 emissionsLarger organisations are increasingly asking suppliers for information about their carbon emissions, energy use, net-zero targets, environmental policies, responsible sourcing, waste, supply-chain practices and wider ESG performance. Requests may include Scope 1 and 2 emissions and, increasingly, information that helps the customer calculate and reduce its own Scope 3 footprint. Suppliers may also encounter sustainability questionnaires, procurement scorecards, tender requirements and requests for evidence supporting environmental claims. Businesses that can provide reliable information and demonstrate measurable progress may therefore strengthen their position in procurement processes and customer relationships, even where they are not themselves subject to mandatory sustainability reporting.
Assess your supplier ESG readinessYour business may qualify for R&D Allowances (RDAs) if it incurs capital expenditure on carrying out qualifying research and development related to its trade. Unlike R&D tax relief, which primarily concerns qualifying revenue expenditure, RDAs are designed for capital investment associated with R&D. They can provide a 100% tax deduction for qualifying capital expenditure in the period in which it is incurred. Eligibility depends both on whether the underlying activity constitutes qualifying R&D and whether the capital expenditure was incurred for the purposes of that R&D.
Check your RDA eligibilityBoth provide tax relief for capital expenditure, but they apply in different circumstances. Standard capital allowances generally provide relief for qualifying plant, machinery and certain other business assets, using mechanisms such as the Annual Investment Allowance, Full Expensing or writing-down allowances. RDAs specifically apply to capital expenditure incurred on carrying out qualifying R&D and can provide 100% relief in the year of expenditure. One particularly important difference is that RDAs can potentially apply to expenditure on buildings or structures used for R&D, which would not normally qualify for plant and machinery allowances.
Review your capital investmentYes, potentially. R&D Allowances can apply to certain capital expenditure incurred on carrying out qualifying R&D or on providing facilities for carrying out that R&D. This can include qualifying expenditure associated with buildings or structures used as laboratories, research facilities, pilot plants, test facilities or similar R&D premises.
The relief does not mean that every building, construction cost or item of land used by an innovative business automatically qualifies. The expenditure must have the required connection with qualifying R&D related to the company’s trade, and exclusions and apportionment rules may apply where a facility has both R&D and non-R&D uses.
Businesses planning substantial R&D facilities should consider R&D Allowances before construction or acquisition decisions are finalised, alongside other capital allowances and potential grant support.
Check your RDA eligibilityR&D Allowances can potentially apply to capital expenditure incurred on carrying out qualifying research and development or on providing facilities for that R&D. Depending on the circumstances, this may include qualifying expenditure on plant, machinery, equipment and certain buildings or structures.
The expenditure must be connected with R&D related to the company’s trade, or to a trade that it intends to carry on. Simply describing an asset or facility as being used for innovation does not make the expenditure eligible.
Where an asset or facility has both R&D and commercial uses, the qualifying amount may need to be apportioned. The underlying activity must also satisfy the tax definition of R&D, so the position should be assessed by reference to the actual scientific or technological work rather than the asset’s commercial description.
Check your RDA eligibilityYes, potentially. The two reliefs address different types of expenditure and can therefore complement one another.
R&D tax relief generally supports qualifying revenue expenditure associated with R&D, while R&D Allowances provide capital-allowance relief for qualifying capital expenditure incurred on carrying out R&D or providing facilities for it. A business investing in a major R&D project could therefore potentially claim R&D tax relief on eligible staffing, consumables and other qualifying revenue costs, while considering R&D Allowances for qualifying capital investment.
Care is required to classify expenditure correctly and avoid claiming two forms of relief on the same cost. Capital expenditure is generally excluded from the revenue-cost calculation for R&D tax relief, although it may qualify for capital allowances instead.
Review your R&D tax relief and RDA positionRDAs should be considered whenever significant capital expenditure is being incurred specifically for qualifying R&D. They can be particularly valuable where expenditure would not qualify for immediate 100% relief under other capital allowance regimes, especially investment in buildings and structures used for R&D. The best treatment depends on the asset, its use, the availability of other allowances and the company's wider tax position. Ideally, RDAs should be considered alongside Capital Allowances, R&D tax relief and potentially grant funding before a major R&D facility or capital investment project begins, so that the available reliefs can be assessed together.
Review your capital investmentPotentially. UK businesses may have access to a range of schemes designed to reduce energy taxes, levies and other electricity costs, particularly where they operate in energy-intensive manufacturing or industrial sectors. These include the Energy Intensive Industries (EII) arrangements and British Industry Supercharger, Climate Change Agreements (CCAs) and associated Climate Change Levy reductions. Eligibility varies considerably between schemes and can depend on your activities, sector classification, energy intensity and how energy is used. A review of your activities and energy bills can help establish which reliefs may be available.
Check your energy relief eligibilityEligibility depends on the particular EII support arrangement and involves both sector-level and business-level considerations.
The business generally needs to manufacture an eligible product or undertake an eligible activity within the specified industrial classifications. It must also satisfy the applicable electricity-intensity test using the relevant financial and energy data. The 7% figure is associated with the sector-level test in the eligibility methodology; the business-level test has its own requirements and should not be treated as the same threshold.
A business producing a mixture of eligible and non-eligible products may be able to receive support only in relation to the electricity associated with eligible production. Eligibility should therefore be assessed against the actual products manufactured, activities undertaken and underlying energy and financial data, rather than the company’s broad industry label alone.
Check your energy relief eligibilityThe potential saving depends on the amount of eligible electricity consumed and the costs included in the company’s electricity bills.
Support may arise through more than one arrangement, including the EII and British Industry Supercharger package. The package can include full exemptions from specified renewable-policy and Capacity Market costs, together with compensation for eligible network charges. Current government material describes network-charge compensation of up to 90% for eligible businesses, while the wider combined support has been expressed in approximate per-MWh terms.
The actual benefit will depend on the company’s eligibility, the proportion of electricity used for eligible production, the applicable implementation dates and the charges included in its bills. A detailed energy-bill and activity review is needed before estimating the saving.
Estimate your potential EII savingsThe British Industry Supercharger is a package of electricity-cost relief measures for eligible energy-intensive industries. It is intended to improve the international competitiveness of businesses exposed to high electricity costs.
The package can provide full exemptions from specified renewable-policy and Capacity Market costs and compensation for eligible electricity network charges. From 2026, the network-charge compensation rate for eligible sectors increased from 60% to 90%.
Eligibility is not available to manufacturing businesses generally. The business must meet the relevant sector, product, energy-intensity and evidence requirements. The position should be distinguished from the separate British Industrial Competitiveness Scheme, which has its own eligibility rules and implementation timetable.
Check your EII eligibilityEligibility is targeted at specified energy-intensive industrial activities rather than manufacturing businesses generally. Eligible activities may include certain operations in sectors such as metals, chemicals, paper, glass, cement and other electricity-intensive manufacturing areas.
The precise test depends on the particular scheme. It may involve specified classification codes, eligible products, electricity-intensity requirements, trade exposure and evidence of the electricity used in eligible production. A business should not assume that its broad sector, Companies House SIC code or general description is sufficient.
The relevant product and activity classifications, site-level use of electricity and current scheme guidance should be checked before eligibility is confirmed.
Check your EII eligibilityYour SIC code can provide a useful starting point, but eligibility should not be determined simply by looking at the SIC code recorded at Companies House. EII eligibility is based on whether the business manufactures products falling within specified eligible industrial classification codes and activities. The actual activity undertaken by the business is therefore critical. A company whose registered SIC code appears relevant may not necessarily qualify, while a business should not automatically assume it is excluded simply because its Companies House classification appears different.
Check your EII eligibilityFirst establish what the business actually manufactures and which industrial classification most accurately describes that activity. For energy-intensive support schemes, eligibility is based on the underlying qualifying activity and products, rather than simply accepting the classification appearing on a company record. Evidence may therefore be needed to demonstrate the nature of the manufacturing activity. If your registered SIC information is inaccurate or outdated, it may also be appropriate to update it, but changing a SIC code by itself does not create eligibility for an energy support scheme.
Check your EII eligibilityPotentially, if your business operates an eligible energy-intensive process or sector covered by the CCA scheme. A CCA is a voluntary agreement under which participating businesses commit to energy-efficiency or carbon-reduction targets in return for significant reductions in the Climate Change Levy charged on their energy bills. A new CCA scheme began in 2026 and runs through to 2033. Eligibility depends on the activities undertaken at the facility and the relevant sector agreement, so it needs to be assessed at site and process level rather than simply by company sector.
Check your CCA eligibilityThe main direct financial benefit is a substantial reduction in the Climate Change Levy. From April 2026, businesses with a qualifying CCA receive a 92% discount on the CCL applying to electricity and an 89% discount on gas and most other taxable fuels, with a 77% discount for LPG. The actual saving therefore depends on the quantity and type of energy consumed. For a large energy user, the benefit can be significant, although businesses must also consider the obligations, targets and costs associated with participating in the scheme.
Estimate your potential CCA savingsThe Climate Change Levy (CCL) is an environmental tax applied to electricity, gas and certain other fuels supplied to businesses and public-sector organisations. It normally appears as part of the business's energy costs. Certain supplies are exempt or receive special treatment, while energy-intensive businesses participating in a qualifying Climate Change Agreement can obtain substantial reductions in the levy. Reviewing your energy use, activities and existing billing can help establish whether the correct CCL treatment is being applied and whether relief may be available.
Check your CCA eligibilityPotentially, yes. The schemes address different elements of energy costs. A CCA primarily provides a reduction in Climate Change Levy, while the EII and British Industry Supercharger arrangements reduce specified electricity policy and network costs. A business may therefore potentially benefit from both where it independently meets the eligibility requirements for each. The overall position should be reviewed carefully to ensure the business qualifies and that relief is being correctly applied to the relevant energy consumption.
Check your EII eligibilityYes. Different schemes address different energy costs, taxes, investments and regulatory requirements, so businesses can potentially benefit from several forms of support. For example, an eligible manufacturer might benefit from EII/British Industry Supercharger support and a Climate Change Agreement, while also accessing tax relief or grant support for qualifying energy-efficiency investment. However, individual scheme rules need to be considered carefully, particularly where two programmes potentially provide support for the same underlying cost or activity.
Review all available energy supportThe opportunities depend on the manufacturer's sector, energy consumption and investment plans. Relevant measures can include EII and British Industry Supercharger support, Climate Change Agreements and Climate Change Levy reductions, alongside tax relief through Capital Allowances for qualifying plant and machinery. Grant programmes may also periodically support energy efficiency, decarbonisation, low-carbon technology and industrial transformation. Rather than considering each scheme independently, manufacturers should review their energy costs and planned capital investment together to identify potentially complementary opportunities.
Review all available energy supportEnergy-intensive businesses should consider whether they qualify for EII/British Industry Supercharger support, a Climate Change Agreement and reduced Climate Change Levy rates, together with any relevant investment incentives or grant programmes. The most valuable opportunities can depend on the nature of the industrial activity and electricity consumption. Because eligibility criteria differ between schemes, a business that fails to qualify for one form of support may still qualify for another.
Review all available energy supportStart with a detailed review of your electricity and gas bills, sites, manufacturing activities, energy consumption and existing relief arrangements. This can establish what Climate Change Levy, renewable policy, Capacity Market and network-related costs are being charged and whether your business may meet the requirements for available reliefs. It is also worth checking whether relief already awarded is being correctly reflected by energy suppliers. For larger industrial businesses, even relatively small billing or eligibility issues can translate into significant costs over several sites and years.
Request an energy cost reviewThe Energy Savings Opportunity Scheme (ESOS) is a mandatory energy-assessment regime applying principally to large UK undertakings and corporate groups. For Phase 4, qualification is assessed at 31 December 2026, with the compliance notification deadline on 5 December 2027. Where a corporate group contains at least one UK undertaking meeting the large-undertaking criteria, the group can fall within ESOS. Qualifying organisations must measure energy consumption, identify energy-saving opportunities and meet the relevant reporting and notification requirements.
Check your ESOS requirementsYes. Although ESOS is a compliance requirement for qualifying organisations, its energy assessments are intended to identify practical opportunities to improve energy efficiency and reduce consumption. Rather than treating ESOS simply as a regulatory exercise, businesses can use the assessment to identify and prioritise investments according to potential energy and financial savings. Phase 4 places greater emphasis on reporting energy savings achieved and reviewing progress against proposed measures, strengthening the connection between compliance and implementation.
Check your ESOS requirementsInvestment in energy-efficient equipment may qualify for Capital Allowances, depending on the type of asset and the business's circumstances. Potential mechanisms include the Annual Investment Allowance, Full Expensing and other first-year allowances. Some investment associated with qualifying R&D may potentially be eligible for R&D Allowances instead. The appropriate treatment depends on the asset, whether it is new or used, how it will be used and the tax position of the business. Energy investment should therefore be considered alongside the wider capital allowances position before expenditure is committed.
Review your energy investment reliefsPotentially. UK government, devolved government, regional and sector-specific programmes periodically provide support for energy efficiency, industrial decarbonisation, low-carbon technology, heat, renewable energy and process improvement. Availability changes considerably over time and individual programmes can have narrow eligibility criteria, funding windows and technology requirements. Businesses planning substantial energy or decarbonisation investment should therefore review the funding landscape early, ideally before contracts are signed or expenditure committed, as retrospective grant funding is generally much harder to secure.
Search for energy fundingA lower-carbon manufacturing project may potentially access several forms of support depending on the technology, sector and scale of investment. These can include grant funding, Capital Allowances, R&D tax relief or R&D Allowances where genuine R&D is involved, and energy-cost relief through schemes such as CCAs or EII support where the business qualifies. This is an area where looking at the project as a whole can be particularly valuable. A major investment in new production technology may involve capital expenditure, innovation, energy savings and decarbonisation, creating several potential support opportunities rather than a single energy incentive.
Review support for your investment