Do R&D credits offer a solution to rising energy costs?

NatWest Tyl research shows that 65% of SMEs spend at least one-fifth of their total business costs on energy, while 8% spend 35-50%. The growth of small and medium companies is impacted by energy costs for nearly 70% of them. 

A ray of hope may exist for business owners facing unforeseen charges, especially those who have undertaken research and development projects

Claims that R&D will offset the rise in energy prices

HMRC created the tax incentive scheme in 2000 to encourage growth and innovation in the UK. Any eligible research and development work conducted by UK limited companies, from start-ups to established companies, may qualify for a tax refund or tax credit.

The mission of a startup is to innovate and advance, isn't it? The problem is that you need a lot of energy to accomplish this - not just the mental energy you exert, but also the electricity you use to power your devices. All of us have been affected by the energy crisis in some way, but we're here to help you find some solutions to the issue.

Despite the government's attempts to control energy bills with the Energy Price Guarantee, UK energy bills are on the rise. Energy expenses account for a large portion of household expenses, as well as business expenses. It's not all bad news, though...

In order to cover the extra costs associated with energy, you may be able to claim R&D credits.

These claims are becoming more and more popular, and the money you get from them can offset rising energy bills during tough times. In 2022, the average R&D tax credit claim for small businesses was £53,000, enough to sustain and grow your company. R&D credits are your solution.

Here's what you need to know about R&D tax relief

As part of its strategy to promote innovation and growth across the UK, HMRC created R&D Tax Relief. R&D tax credits may be available if your business works to overcome a particular technological uncertainty. As long as you show that you were trying to advance science and technology, even if you weren't able to overcome that uncertainty, you can still gain benefits.

Many businesses suffered losses during the pandemic, so R&D Tax Credits can provide a much-needed boost. A qualified chartered accountant or online accounting service can make the process of applying for the credits easier. Best of all, you can receive the relief in the form of a cash payment or a corporate tax reduction!

Rising energy costs can be offset by R&D claims on average. Additionally, R&D is processed much more quickly than grants. Consequently, if your company is facing unforeseen circumstances, R&D Tax Credits can save the day.

Do you qualify for R&D credits?
The first thing you need to do is ensure that your research and development project focuses on making advances in science or technology. In addition to developing a new product or process, there needs to be a genuine effort to solve a scientific or technical problem.

In addition, your company must be based within the European Economic Area and pay corporation tax in the UK. In order to receive R&D tax credits, you must meet these requirements.

For your project to qualify for R&D tax credits, it's important to keep in mind HMRC's definition. Scientific and technological uncertainties, as well as new products, processes, or services, are included in this definition. Moreover, your company must demonstrate that the project represents a significant advance in the field.

Your claim must also include what types of costs are allowed. In general, these include things like the following:

• Staffing costs

• Consumables

• Software

• Equipment

• Subcontracting

A guide to applying for R&D tax credits

Whenever you deal with HMRC, it usually begins with a form (or a few). In order to file a claim, it's a good idea to have a professional on your team, like Zyla Accountants!

HMRC will process your application and give you a break within 28 days.

There may be a small fee charged by these professional services based on the total amount of your claim. However, they can help you find all eligible costs that you might otherwise overlook.

One important difference between R&D tax credits and grants is that they are processed much faster. R&D tax credit claims that need to be handled urgently are handled by a separate department within HMRC. The relief can be collected as cash or reduced corporate tax when it is time to collect. When claiming R&D tax relief for the first time, you can even go back two years.

What is the relationship between this and energy bills?

If you are trying to get back on track after the pandemic, the average R&D claim can cover your energy costs. You can stop your startup from crumbling due to crazy energy bills and continue working on research.

Local authorities and support groups often offer grants to cover energy costs for businesses. The problem with grants is that they're different where you live, and there's a lot of competition. The pros and cons of applying need to be weighed carefully.

Manufacturing businesses know that energy costs can really hurt. For the purpose of investing in energy-efficient equipment as well as onsite energy generation, you need some extra cash. R&D tax credits can help!

Businesses are eligible for research and development projects as long as they relate to their trade and can provide evidence of the following:

• Looked for an advance in science and technology.

• Had to overcome uncertainty.

• Tried to overcome this uncertainty.

• Could not be easily worked out by a professional in the field.

View our range of testimonials for R&D here