R&D Tax Relief in Net Zero Innovation Projects

Achieving the UK’s Net Zero carbon emission targets by 2050 will require unprecedented innovation with UK Businesses playing a crucial role in developing the novel technologies necessary to reduce energy consumption, maximise resource efficiency and cut carbon emissions.

Published/updated:

25 October 2021

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Introduced by the UK Government in 2000, the R&D tax relief scheme is designed to encourage innovation and global competitiveness by allowing companies to reclaim some of the money invested in qualifying research and development. R&D tax credits are generally considered to be one of the most attractive tax relief available, often resulting in significant cash repayments from HMRC.

What are the benefits?

The benefits of the programme include increased cashflow, which is especially important to small, developing companies. It also encourages development of a corporate philosophy that embraces innovation and improvement.

Do you qualify?

A common misconception is that the scheme is just for companies with R&D departments and men in white coats. The fact is that any company that spends money trying to improve a product or service through a technological advance, using qualified staff and appropriate project controls, and where there's doubt about the project's success is likely to be eligible.

R&D in Net Zero Projects

Achieving the UK's Net Zero carbon emission targets by 2050 will require unprecedented innovation across the economy in new technologies, new ways of deploying existing technologies, new business models and processes. UK Businesses will play a crucial role in developing the novel technologies necessary to reduce energy consumption, maximise resource efficiency and cut carbon emissions in projects such as (but not limited to):

  • Sustainable Construction
  • Green Transportation
  • Next-generation battery technology
  • Clean Energy
  • Renewable Energy
  • Future Energy Systems
  • Sustainable Agriculture
  • Environment and Human Health
  • Sustainable Fashion

What are the potential areas of eligibility?

A vast range of activities, not limited to:

ADVANCES CARBON CAPTURE, USAGE AND STORAGE (CCUS)

  • Bringing down the cost of capturing and sequestering CO2.
  • Development of Direct Air Carbon Capture (DAC) and Direct Seawater Carbon Capture (DSC).

BIOENERGY

  • Improving the productivity of biomass supply and developing conversion technologies and the generation processes for biomethane, green hydrogen, biofuels and electricity.

CONSTRUCTION

  • Designing new buildings to be net-zero or, even better, energy positive to give back more than they consume over their lifetime through developing battery storage and other smart solutions.
  • Advances to material science and understanding of structures and failure modes.
  • Decarbonising energy use on construction sites and tackling waste steam treatment.

DISRUPTIVE TECHNOLOGIES

  • The development and demonstration of disruptive technologies that could reduce energy consumption, maximise resource efficiency, and cut carbon emissions in industry.

ENERGY EFFICIENCY, POWER GENERATION AND STORAGE

  • Developing technologies, products and processes in energy efficiency, power generation (e.g., offshore wind & nuclear advanced modular reactors) and better storage solutions.

DIRECT AIR CAPTURE AND GREENHOUSE GAS REMOVAL (GGR)

  • Developing direct air capture (DAC) technology.
  • Removal of carbon dioxide (CO2) from the sea.
  • Optimising the production of biohydrogen with carbon capture and storage (CCS).
  • Developing pyrolysis technology to incorporate enhance carbon capture capacity, producing a range of outputs including biochar for carbon sequestration, carbon products for construction, and heat for a local district heating networks.
  • Developing biomass gasification as a future carbon negative technology.
  • Removing carbon dioxide from the atmosphere through acceleration of naturally occurring rock mineralisation processes.

HYDROGEN

  • Advances to hydrogen technologies across the whole hydrogen value and supply chain, from production, supply, storage to end use.

INDUSTRIAL FUEL SWITCHING

  • Development of technologies that enable industry to switch from high to low carbon fuels.

TRANSPORTATION

  • Development of electric vehicles and sustainable aviation fuel.

What problems might a company face?

Resolving technological uncertainties relating to:

  • Increasing performance, power output, and/or efficiency.
  • The design, manufacture and testing of prototypes.
  • Scalability: e.g, increasing size from prototype to 'first-in-class'.
  • Developing accurate computer models to all identify possible failures in design, manufacturing and assembly processes.
  • Improvements to materials properties, such as increase in yield or tensile strength, increase in toughness, corrosion resistance, and resistance to fatigue.
  • Designing for operation in hazardous environments.
  • The integration of components, machinery and/or processes advancing the technology to 'above industry' standards.
  • Improvements to products or manufacturing processes: making them faster, more efficient, and safer.
  • Improving installation techniques.
  • Complying and adapting new legislation.
  • Improving condition monitoring technologies.

Eligibility Questionnaire

If you can answer 'Yes' to most of these questions then, based on our experience across thousands of clients, it looks like you could have a successful claim:

  • Have you developed new tools, products or services using technology?
  • Have you tried to improve your existing products through technical changes?
  • Have you had to resolve technical problems with any of your products?
  • Have you found more efficient ways to produce your products or services?
  • Have you experimented with new equipment or production techniques?
  • At the start of a project, did you ever think 'I'm not sure of the best way to do this'?
  • Have any of your projects failed for technical reasons?

Why ABGI?

ABGI is a leading international tax incentive and innovation management advisor. We help companies accelerate their innovation activity by identifying and securing appropriate funding in the form of grants, tax incentives or commercial funding.

With 30+ years heritage and 200 experts, we manage +£870million of innovation incentive annually across 19 countries, for some of the world's best known brands.

WHATEVER INNOVATION FUNDING CHALLENGES YOU FACE - WHEREVER YOU'RE BASED - WE CAN HELP.

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