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Labour is making green energy a priority, putting R&D tax at the centre

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Author: Tom Mason

The Labour Party’s manifesto makes it clear that the new Government intends to invest in green energy, sustainable manufacturing and innovative technologies – aiming to achieve ‘clean energy by 2030’.

Of £7.3 billion allocated to support key high-growth sectors in the UK as part of the National Wealth Fund, roughly £4 billion has been earmarked for investment in sustainable sectors such as clean energy.

This is set to be in partnership with the Green Prosperity Plan and the plan for Great British Energy, funded with £8.3 billion.

In short, the green energy sectors are set to receive a major influx of funding.

As a result, it looks likely that productivity and innovation from these sectors will increase markedly in the coming years – which may well result in a spike in the number of R&D tax claims coming out of these industries.

Changing demand

As sustainable sectors grow and produce innovative work, the level of R&D in these sectors overall will rise – leading to the potential for more successful claims.

As a result of this growth, we’re also likely to see a rise in the number of smaller and new businesses claiming R&D tax for the first time, and therefore needing guidance from you on advance notification and preparing the claim itself.

If recent changes to the R&D tax relief scheme have led to you scaling back or closing your R&D tax advisory, now might just be the time to revive your practice with some external support.

Sector-specific challenges

Some sectors carry additional challenges when it comes to R&D tax relief, and sustainable energy and other green innovations are no different.

The main issue facing these sectors is the question of genuine R&D – when does a sustainable innovation meet the Government’s definition of R&D.

There are many instances in the case of existing technologies being used in a new way to achieve a sustainable innovation, for example, which would not meet the requirements to qualify for R&D tax relief.

Additionally, a surge in claims from a specific sector is likely to be flagged for further investigation by HMRC, so you’ll need to work with clients to ensure that all claims are fully compliant.

While the world of R&D tax relief is unlikely to change as the new Government gets underway, sustainable technology and clean energy are likely to develop quickly – becoming a hotspot for good R&D tax teams as businesses benefit from tax reliefs and weather a rise in enquiries.

Want to improve your R&D tax practice? Contact us today for tailored support.