R&D Tax Credits for BioFuel & Anaerobic Digestion Companies

The R&D tax relief scheme is highly-relevant to the AD and bio-fuel sectors and your company may be able to claim up to of your development costs for the past 3 years. This includes testing, experimentation, product development and process improvement. If your AD or bio-fuel company pays UK corporation tax, you can potentially be making a claim every year going forward.

Our staff combine industry know-how and technology backgrounds with the practical experience of compiling R&D claims.  We prepare your R&D claim using our repeatable, rigorous and robust process to produce high-quality supporting documentation for HMRC.

We work with you to obtain the maximum benefit for your business. We have an exceptional success rate in claims accepted by HMRC, and work entirely on a no-win no-fee basis meaning that you don’t pay any fees until you receive your benefit.

Contact us today so that we can determine if you can benefit from this scheme.

Find out how much you could claim with our R&D tax credit calculator.

R&D Tax Credits for BioFuel and Anaerobic Digestion: Key Takeaways

1. AD and biofuel projects often qualify as R&D

Anaerobic digestion and biofuel plants are rarely off‑the‑shelf. Designing, commissioning, and optimising them typically involves resolving genuine scientific and technological uncertainties. Under the DSIT 2024 guidelines, this work can qualify for R&D tax relief where you:

• Seek an advance in science or technology; and
• Face uncertainties that a competent professional could not easily resolve at the outset.

2. Typical qualifying activities in AD / biofuel

You may be doing qualifying R&D if you are systematically experimenting, testing, or developing solutions in areas such as:

• Feedstock optimisation – co‑digestion ratios, pre‑treatment, contamination management, and retention time where performance cannot be reliably predicted.
• Process design and engineering – bespoke plant layouts, mixing regimes, temperature and pH control, or novel reactor configurations to address site‑specific constraints.
• Biogas upgrading and purification – developing or adapting systems to remove CO₂, H₂S, siloxanes and other contaminants to grid or vehicle‑fuel standards where off‑the‑shelf solutions do not work.
• Digestate management – new or improved methods for separation, nutrient recovery, concentration, and achieving PAS 110 or equivalent quality standards.
• Novel feedstock processing – handling difficult or variable inputs (food waste, slurries, residues, industrial by‑products) where particle size, contamination, or biochemical variability creates process uncertainty.
• Monitoring and control systems – advanced instrumentation, data analytics, and automation to stabilise biological processes and optimise yields in real time.
• Scale‑up – moving from lab or pilot to full‑scale where mixing, heat transfer, foaming, and stability behave differently at volume.
• Environmental compliance – developing solutions to meet tight emissions, odour, or discharge limits where standard technologies are inadequate.

3. The merged R&D scheme (from 1 April 2024)

All companies now claim under the merged RDEC‑style scheme for periods starting on or after 1 April 2024:

• Headline credit rate: 20% of qualifying R&D expenditure.
• Typical net benefit: ~15% after 25% corporation tax (around 15p per £1 of qualifying spend).
• Illustration: £150,000 qualifying spend → ~£22,500 net benefit.

For loss‑making, R&D‑intensive companies (where qualifying R&D is ≥30% of total expenditure), the Enhanced R&D Intensive Support (ERIS) can provide a payable credit of up to 27% of qualifying R&D spend. This is particularly relevant for:

• New plants in development or commissioning;
• Companies running extended trials before full commercial operation;
• Technology developers supplying AD / biofuel solutions.

4. Costs you can include

Typical qualifying cost categories include:

• Staff costs – salaries, employer NIC, and pensions for engineers, process scientists, plant operators, and technical managers directly involved in R&D.
• Subcontractors – UK‑based specialist engineering firms, labs, universities, and consultants carrying out R&D (usually restricted to 65% of the invoiced cost under the merged scheme).
• Consumables and materials – feedstocks, chemicals, enzymes, biological agents, test rigs, and other items consumed or transformed in trials.
• Software – modelling, simulation, SCADA, control, and data‑analysis tools used in R&D.
• Cloud computing and data – cloud processing, storage, and data acquisition used in R&D (eligible from 1 April 2023).
• Utilities – heat, power, and other utilities used in R&D activities.

From 1 April 2024, most overseas subcontractor and externally provided worker costs are no longer eligible. To maximise relief, ensure that qualifying R&D work is carried out in the UK.

5. Practical examples of qualifying work

• Feedstock variability: Systematic trials to stabilise gas yield from mixed food waste using different pre‑treatments, co‑digestion ratios, and retention times.
• Biogas upgrading: Developing a membrane‑based system to reach grid‑standard methane purity at specific flow rates where existing commercial solutions fail.
• Digestate processing: Creating a reliable nutrient extraction and concentration process for variable digestate streams where standard separation does not give consistent results.

In each case, the work qualifies because:

• There was no obvious solution at the outset;
• The company followed a structured programme of testing and analysis;
• The aim was to achieve a technological advance, not just routine operation.

6. Common pitfalls to avoid

1. Treating routine operations as R&D – developing or running a proven plant to standard operating procedures is not R&D. The qualifying element is the experimental work to develop, modify, or troubleshoot when outcomes are uncertain.
2. Missing deadlines – you must:

• Submit R&D claims within 2 years of the end of the accounting period; and
• For first‑time claimants, file a claim notification within 6 months of the period end.

1. Weak technical narratives – HMRC expects clear explanations of:

• The baseline of existing industry knowledge and available solutions;
• The specific scientific/technological uncertainties;
• The systematic approach taken (tests, iterations, analysis) and why the outcome was not predictable.

1. Overlooking eligible costs – many operators under‑claim by ignoring subcontractors, consumables, utilities, and software used in R&D.

7. How Innovation Plus can help

Innovation Plus is a preferred R&D tax adviser to members of the Anaerobic Digestion and Biogas Association (ADBA). The team combines:

• Technical specialists in biology, chemical engineering, and plant design; and
• R&D tax experts who understand HMRC’s expectations and how to defend claims.

This combination allows them to:

• Identify and document qualifying R&D within day‑to‑day plant development and optimisation;
• Quantify eligible costs accurately under the merged scheme and ERIS where relevant;
• Prepare robust technical narratives aligned with DSIT 2024 guidelines.

8. Next steps – free assessment

If you are:

• Designing or commissioning a new AD or biofuel plant;
• Running trials to improve gas yield, stability, or digestate quality;
• Developing new control, upgrading, or environmental solutions;

you are likely undertaking qualifying R&D.

Contact Innovation Plus for a free, no‑obligation assessment. They will:

• Review your projects and activities against HMRC’s R&D criteria;
• Estimate the potential benefit under the merged scheme (and ERIS, if applicable);
• Outline the information and records needed to support a robust claim.