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Could R&D Credits Help with the Rising Energy Costs?


As a startup, your mission is to innovate and make progress, right? Unfortunately, that takes a lot of energy - and not just the mental energy you put in, but also the energy you use to power all your devices. The energy crisis has impacted everyone in some way, but we're here to help you with some solutions.

Energy bills are on the rise in the UK, even though the government's trying to control them with the Energy Price Guarantee. Not only will this affect households, but businesses too, since a big chunk of their expenses goes to energy. But, here's some good news...

R&D credits can help you cover the extra costs of energy.

More and more companies are using them, and the money you get from these claims can really help you out in tough times and offset the rising energy bills. In 2022, the average R&D tax credit claim for small businesses was worth £53,000, which is enough to keep your business running and growing. In short, R&D credits are the solution to your problems.

A little about R&D Tax Relief

R&D Tax Relief was set up by the HMRC to promote innovation and growth across the UK. So if your business researches to overcome a specific technological uncertainty, you could be eligible for R&D tax credits. And, even if you didn't overcome that uncertainty, you can still benefit as long as you show that you were trying to advance science and technology.

With many companies facing losses during the pandemic, R&D Tax Credits can give your business a much-needed boost to keep your operations running smoothly. Applying for the credits requires a detailed report to the HMRC, but using a qualified chartered accountant or online accounting service can make the process easier. And, the best part is, you can choose to receive the relief as a cash payment or a corporate tax reduction!

When it comes to rising energy costs, the average R&D claim is enough to offset those bills. And, compared to grants, the processing for R&D is much faster. So, if you're facing unforeseen circumstances, R&D Tax Credits can be a lifesaver for your business.

While we're on the topic of energy, discover the transformative power of putting people first

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Are you eligible R&D Credits?

But how do you know if you're eligible? Let's break it down.

First off, your R&D project must be focused on making advancements in science or technology. It's not enough to just be developing a new product or process - there needs to be a genuine effort to solve a scientific or technical challenge.

Next up, your company must be operating within the European Economic Area and paying corporation tax in the UK. You can only receive R&D tax credits if you meet these requirements.

When it comes to determining if your project is eligible, it's important to keep in mind the definition of R&D set by HMRC. This definition covers projects that resolve scientific or technological uncertainties, as well as projects that develop new products, processes, or services. Your company must also be able to prove that the project is a big step forward in the field and could bring significant benefits.

Finally, you must know what types of costs can be included in your claim. Usually, this includes:

  • Staffing costs
  • Consumables
  • Software
  • Equipment
  • Subcontracting

...and more.

Team meeting to discuss how R&D could help the business save on energy costs

How to apply for R&D tax credits

As with most HMRC dealings, it all starts with a form (or a few, to be precise!). Because R&D is a language of it's own, it's a good idea to get a pro on your team, like a chartered accountant or an online accounting service, to help you file your claim. It's not as complicated as it seems, and it only takes the HMRC 28 days to process your application and give you a break.

Just so you know, these pro services might charge you a small fee based on the total value of your claim. But the good news is that they can help you find all the eligible costs that you might miss otherwise.

You should remember, R&D tax credits are different from grants in one important way - they get processed a lot faster! The HMRC has a special department just for handling urgent R&D tax credit claims. And when it's time to collect, you can choose to get the relief as cash or a reduction in corporate tax. If it's your first time filing, you can even go back two financial years to claim R&D tax relief.

paperwork for R&D 2023

But how does this relate to energy bills?

The average R&D claim can cover your energy costs, which is a huge relief, especially if you're trying to get back on track after the pandemic. It can stop your startup from falling apart because of the crazy energy bills and let you keep working on your research.

A lot of businesses try to find grants from local authorities or support groups to cover their energy costs. But grants can be tricky because they're different depending on where you live and there's a ton of competition. So, you've got to weigh the pros and cons before you apply.

For those of you in the manufacturing business, you know energy costs can really hit you where it hurts. You need some extra cash to invest in energy efficient equipment and onsite energy generation. That's where R&D tax credits come in!

Ready to start your R&D claim?

Claim back up to 18.6% of your R&D spend.

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