R&D Tax Credits for Clean Technology Companies

There are a number of areas where we have successfully helped Cleantech companies claim for solutions they have developed or integrated. These have included grey water systems, hydroponics, renewable energy, irrigation solutions, drainage and green-walls.

Experimentation in this area can be quite labour-intensive there is usually a broad cost base that can qualify, which can include, for example, labourers.

Innovation Plus have helped many companies in the Cleantech sector make successful R&D tax credit claims and are preferred suppliers of R&D tax advice to members of the Anaerobic Digestion and Biogas Association.

Unlock R&D Tax Credits for Your Clean Technology Company

The clean technology sector is rapidly expanding in the UK, fuelled by net-zero commitments and growing private investment. If you are developing renewable energy systems, improving energy storage, working on carbon capture, or innovating in waste-to-energy or circular economy solutions, you are very likely undertaking work that qualifies for R&D tax relief under CTA 2009.

Many cleantech businesses, especially early-stage ventures, either don’t realise they qualify or assume the process is too complex. That misconception can cost tens of thousands of pounds every year.

What Counts as R&D in Cleantech?

HMRC follows the DSIT Guidelines (2024): R&D must seek an advance in science or technology by resolving scientific or technological uncertainty. In clean technology, such uncertainties are common.

Your projects may qualify if they involve:

• Renewable energy system development – designing, prototyping, or optimising solar, wind, tidal, or geothermal systems where performance, efficiency, or durability outcomes are not yet known
• Energy storage innovation – new battery chemistries, improved charge/discharge cycles, hydrogen fuel cells, or novel thermal storage solutions
• Carbon capture and sequestration – methods to capture, transport, or store CO₂ where scalability, stability, or efficiency is uncertain
• Waste-to-energy and circular economy processes – converting waste into energy or reusable materials via pyrolysis, gasification, anaerobic digestion, or other novel processes
• Smart grid and energy management systems – software and hardware that improve distribution, storage, or consumption of energy across networks
• Water treatment and purification – new or improved desalination, recycling, or contamination removal technologies
• Sustainable materials development – new biodegradable, recyclable, or low‑carbon materials for construction, packaging, or manufacturing

If a competent professional could not easily work out the solution at the outset, there is a strong chance the work qualifies.

The Merged R&D Scheme: What It Means for Cleantech

For accounting periods starting on or after 1 April 2024, most companies claim under the merged R&D Expenditure Credit (RDEC) scheme.

• Headline credit: 20% of qualifying R&D expenditure
• After 25% corporation tax, this typically gives a net benefit of ~15p per £1 spent

Example:

• Qualifying R&D spend: £200,000
• Approximate net benefit: £30,000 (via reduced corporation tax or a cash payment)

Enhanced R&D Intensive Support (ERIS)

Loss‑making cleantech SMEs that are R&D intensive (qualifying R&D ≥ 30% of total expenditure) may access ERIS, offering a more generous payable credit of up to 27% of qualifying expenditure.

This is particularly valuable for pre‑revenue cleantech startups investing heavily in technology development before commercialisation.

Costs You Can Include in Your Claim

You can typically claim for:

• Staff costs – gross salaries, employer NIC, and employer pension contributions for employees directly engaged in R&D
• Subcontractor costs – payments to UK‑based subcontractors performing R&D on your behalf (usually subject to a 65% restriction under the merged scheme)
• Consumables and materials – materials, chemicals, reagents, and components used or transformed during R&D
• Software licences – software used directly in R&D activities (e.g. simulation, modelling, data analysis, control systems)
• Cloud computing and data costs – cloud infrastructure, processing power, and data acquisition used in R&D (eligible from 1 April 2023)
• Utilities – heat, light, and power consumed in R&D

Location rule: From 1 April 2024, costs for subcontractors and externally provided workers carrying out R&D outside the UK are generally not eligible. Cleantech companies with international research partners must ensure that qualifying R&D work is performed in the UK to be claimable.

Common Pitfalls for Cleantech R&D Claims

1. Confusing Commercial Delivery with R&D

Not all innovation is R&D for tax purposes. The work must involve genuine scientific or technological uncertainty.

• Not R&D: Routine deployment of existing solar technology on a standard building
• Potential R&D: Developing a new mounting system to cope with unusual wind loading or structural constraints where the solution is not obvious

Scaling up a proven technology only qualifies where the scaling introduces new technical challenges that require systematic investigation.

2. Not Separating Qualifying and Non‑Qualifying Activities

A single commercial project can contain both qualifying and non‑qualifying work.

• Installation, sales, and routine configuration: non‑qualifying
• Experimental design, prototyping, testing, and resolving technical failures: qualifying

You need to identify and document the specific R&D elements within broader projects.

3. Poor or Retrospective Documentation

HMRC is scrutinising R&D claims more closely, including in cleantech.

You should keep contemporaneous records of:

• Technical objectives and hypotheses
• Design iterations and test plans
• Experimental results (including failures)
• Key technical decisions and why alternatives were rejected

Reconstructing this after the fact is weaker in the event of an HMRC enquiry.

Why Work With a Specialist?

Cleantech R&D often spans:

• Mechanical, electrical, and civil engineering
• Chemistry and materials science
• Computer science, data, and control systems
• Environmental and biological sciences

A generalist accountant may miss qualifying activities or struggle to express your work in the technical language HMRC expects, particularly around:

• The baseline of existing knowledge
• The specific scientific/technological uncertainties
• The systematic approach taken to resolve them

At Innovation Plus, we combine:

• Technical specialists with real‑world cleantech experience (solar, wind, storage, waste, sustainable materials, and more)
• R&D tax experts who understand the legislation, HMRC practice, and enquiry trends

Unlock R&D Tax Credits for Your Cleantech Innovation

If your business is developing clean technologies in the UK, there is a strong chance you are carrying out qualifying R&D — and potentially missing out on valuable tax relief.

Under the merged R&D scheme for periods beginning on or after 1 April 2024, qualifying cleantech companies can claim an R&D expenditure credit (RDEC) at 20% of eligible costs. For R&D intensive companies, where qualifying R&D is at least 30% of total expenditure, the enhanced R&D intensive support (ERIS) scheme can increase the effective benefit to around 27%.

Are You Doing Qualifying R&D?

HMRC follows the DSIT Guidelines, which focus on projects that:

• Seek an advance in science or technology; and
• Aim to resolve scientific or technological uncertainty.

In cleantech, this often includes:

• Renewable energy systems – novel PV configurations, new wind or tidal designs, advanced storage (batteries, hydrogen, thermal) where performance cannot be reliably predicted from existing knowledge.
• Waste-to-resource technologies – new or improved anaerobic digestion, pyrolysis, or biological treatment processes where reaction behaviour, contamination, or scale-up present genuine uncertainty.
• Water and grey water treatment – filtration, purification, and recycling systems that must meet demanding standards under variable or decentralised conditions.
• Green building technologies – green walls, sustainable insulation, heat recovery, and smart controls where thermal, structural, biological, or interoperability issues must be resolved.
• Hydroponics and controlled environment agriculture – growing systems, nutrient delivery, lighting, and control algorithms where biological–engineering interactions are not well understood.
• Carbon capture and reduction – capture, sequestration, and utilisation technologies facing unresolved challenges in efficiency, scale, and cost.

If your team is experimenting, iterating, and overcoming non-trivial technical hurdles, you are likely doing qualifying R&D.

What Costs Can You Claim?

Under CTA 2009, s1044 and related provisions, typical qualifying costs include:

• Staff costs – salaries, employer NICs, and pensions for employees directly involved in R&D, apportioned by time spent.
• Subcontractor costs – payments to unconnected subcontractors (usually 65% of the payment) and, for connected parties, the relevant share of their qualifying costs.
• Consumables – materials, components, chemicals, biological inputs, and prototypes consumed or transformed in the R&D process.
• Software licences – tools used directly in R&D such as CAD, simulation, data analysis, and environmental modelling.
• Data and cloud computing – data sets, storage, compute, and cloud platforms used in R&D.
• Contributions to independent research – qualifying payments to universities and other research bodies.

You cannot claim for general overheads (rent, utilities, office costs), capital expenditure, land, IP and patent costs, or the cost of producing goods and services for sale.

Key Changes Under the Merged Scheme

• Above-the-line credit – the 20% RDEC is shown above the line, directly reducing corporation tax and, for loss-makers, can generate a payable cash credit.
• Overseas subcontracting restriction – from 1 April 2024, most overseas R&D subcontracting is excluded unless specific conditions mean the work genuinely cannot be done in the UK (e.g. environmental, geographical, or regulatory constraints).

Many cleantech businesses carry out core development and testing in the UK, so the impact may be limited, but overseas lab work, specialist fabrication, or field trials should be reviewed.

Examples of Cleantech R&D We Have Supported

Innovation Plus has helped cleantech companies secure relief for projects such as:

• Urban wind turbines – resolving turbulence and fatigue issues in small-scale turbines for built-up environments.
• Residential grey water systems – achieving potable-quality output from highly variable domestic sources.
• Anaerobic digestion optimisation – adapting processes to new organic feedstocks through controlled experimentation.
• Green wall systems – improving substrates, irrigation, and plant selection across diverse building conditions.
• Controlled environment agriculture – LED spectral tuning and control strategies to maximise yield while cutting energy use.

Maximising Your Claim

Cleantech R&D is often labour-intensive, so staff time is usually the largest cost driver. To secure and defend your claim:

• Track staff time contemporaneously by project and activity.
• Distinguish clearly between qualifying R&D and routine or commercial work.
• Capture all relevant projects across the business, not just the most obvious flagship development.

Even simple weekly time allocations can be sufficient if they are consistent and recorded in real time.

Why Work With Innovation Plus?

We specialise in building technically robust, compliant R&D claims for cleantech businesses. Our approach includes:

• Deep technical engagement with your projects and challenges.
• Clear mapping of activities to DSIT and CTA 2009 criteria.
• Transparent, defensible cost methodologies.
• Detailed technical narratives that stand up to HMRC scrutiny.

If you are developing clean technologies in the UK, we can help you quantify your eligible activities and estimate the value of your claim.

Get in touch for a no-obligation assessment of your cleantech R&D and an indication of the benefit available under the merged R&D and ERIS schemes.