R&D Tax Reliefs make green innovation pay off

13 September 2021 Caroline Hawkins View all News

The COP26 negotiations are considered the most important climate change gathering since the Paris climate agreement of 2015.

Amid news that the impacts of climate change are hitting faster than expected, world leaders are tasked with taking urgent action to adapt to the climate emergency.

Tackling climate change requires new and innovative ideas, products, and processes from companies, but such innovation is often an expensive undertaking.

One way the UK government is encouraging UK companies to grow investment in green innovation is through very generous tax incentives, including R&D tax relief and Patent Box.

How does R&D tax relief reward innovation?

R&D tax relief encourages companies to innovate through a combination of corporation tax breaks and cash credits. These reliefs are often worth around a quarter of what the company spent innovating – so it is an extremely generous, government backed incentive to innovate.

Patent Box tax relief allows organisations to pay a lower corporation tax rate of 10% on products derived from patented products or processes.

How environmentally friendly innovation is rewarded

A packaging manufacturing company invested in developing innovative, high-performance packaging solutions using recycled waste materials – an extremely important area in the fight against climate change.

This project included many challenges and uncertainties, including ensuring that the products had the right quality and consistency, while optimising the output of the manufacturing process.

Through the government-backed R&D tax reliefs programme, Radius helped this company save over £60,000.

Another manufacturer, this one of metallic components, invested in increasing the efficiency and reducing waste in production, and was able to claim a corporation tax saving of over £25,000.

Additionally, a footwear manufacturer was able to save over £15,000 in tax following its development of an innovative shoe using vegan friendly materials rather than leather.

Radius has also worked with a specialist manufacturer of thermal systems, whose work innovative work included the development of insulation solutions for plastic recycling. Through the government-backed scheme, they were also able to save over £25,000 in tax.

Finally, a manufacturer of innovative industrial refrigeration solutions invested in the development of more energy efficient refrigeration units – this was a challenging project, which included reducing the overall power required to run the system. This company was also able to save over £23,000 in R&D tax relief from this work.

Does your innovative work qualify?

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R&D tax relief claims can be made as part of the CT600 corporation tax return, and HMRC aims to process SME claims within 28 days of receiving them.

From the climate emergency to COVID recovery, there has never been a more important time for companies to invest in R&D, and this generous incentive means the pursuit of greener, more efficient innovations can benefit businesses in both the short and longer term.

For your free eligibility checklist, and to see how much R&D tax relief you could claim, visit the Radius website today.

Tax-Saving Tips for Individuals and businesses

Written especially for entrepreneurs and owner-managed businesses, this guide is full of planning ideas and tax risks to avoid.

If you're looking for ways to reduce your liability, claim your copy and start planning how you could pay less tax.

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Read the full Radius Case Study Guide

Radius has helped clients save over £19m in R&D tax relief in the last 6 years, at an average of £38k each. Here you can learn more about how we helped specific, innovative companies claim their entitlement.

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