Blog: Tax Talk – Green R&D

Date: October 14, 2019

By Nigel Holmes, Head of R&D Technical Operations at Catax

Following last month’s ‘Green Month’, Catax are looking forward to continuing many of our more sustainable initiatives into the future. After all, we will not save our planet through short term activity. It does seem the ideal time though to consider green and environmental issues from an R&D tax relief perspective.

There is no escaping environmental and climate change news these days. Indeed it is probably the most constant news item after Brexit and in reality is far more important as the issues of our European status will be long forgotten in a few years, whatever your stance, whereas we need to ensure our Planet Earth is here for many more thousands of years.

So how can companies that are taking steps to play their part benefit from the generous R&D tax relief schemes, whether as an SME or a large company?

Well firstly there are, of course, companies creating wonderful environmentally efficient products such as energy-producing products (solar, wind, water power), fossil fuel-saving products (electric cars), those looking to use less packaging or more recyclable packaging, roads being built from recycled materials including plastic and many more situations. Many of these companies will be undertaking activities that will meet the definition of R&D for tax relief purposes.

However, let us not forget that R&D tax relief is also available to companies that meet the definition by creating new, or significantly improving, systems and processes. This is where companies who are not looking to create a new product that carries “green” credentials can do their bit yet still claim R&D tax relief.

I was watching a TV programme the other day and was flabbergasted to hear how much water is used to turn raw cotton into fabric then using even more water to dye that fabric. Innovators in the fashion industry are taking steps to address this. The end product remains a t-shirt, but thousands of litres of water can be saved.

Therefore companies seeking to alter or improve their processes which contain methodologies to reduce water, electricity or fuel consumption may be able to claim R&D tax relief if the steps being taken are new to their field of technology and were challenging to address.

In fact many R&D tax claims can be regarded as environmentally driven. Many more people are turning vegan for environmental reasons and the production of vegan food may also be a sector where R&D activities can be found.

So as the human race continues to wrestle with environmental and climate change issues let us not forget that there are also tax benefits available that can help companies play their part.

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