Are you maximising your tax relief opportunities?

Businesses in energy intensive industries, as well as those investing in research and development, should check they are maximising their opportunities for tax relief, according to international consulting firm Leyton.

Businesses involved in manufacturing or working with qualifying materials could save around 20% of their total monthly electricity costs by accessing the Government’s Energy Intensive Industries (EII) Scheme. The scheme is a form of energy tax relief that allows eligible companies to reduce their energy bills through an exemption on taxes that fund low-carbon and renewable support schemes.

EII was introduced to help improve the competitiveness of the UK’s most energy intensive businesses, and to help mitigate the impact of renewable policies. Through the scheme, eligible businesses can apply for compensation for a proportion of the costs of their energy bills.

Much of the focus for this scheme falls on heavy industrial users such as those in the manufacturing, engineering, mining, and quarrying sectors. Qualifying manufacturing industries include wood, paper, grain milling and metal production.

The relief comes in the form of an EII certificate, exempting them from the indirect costs of renewable energy taxation schemes. Qualifying businesses receive an EII certificate, which confirms that they are eligible for Contracts for Difference, Renewables Obligation and small-scale Feed-in Tariffs (FIT) exemption. To receive the exemptions, businesses must then pass the EII certificate to their electricity provider.

There are two tests that determine whether a business is eligible for an EII certificate. These include:

  • The sector level test: The business must manufacture a product in the UK within an eligible sector that has a specific 4-digit NACE code (see the below section on qualifying sectors)
  • The business level test: The business must pass a 20% electricity intensity test.

Research & Development Relief

Companies working on particularly innovative science and technology projects can also claim Research and Development (R&D) relief on their Corporation Tax.

To qualify, the R&D project must relate to the company’s trade – either an existing one, or one that they intend to start up based on the results of the R&D.

To claim, the business needs to explain how a project:

  • Looked for an advance in the field
  • Had to overcome the scientific or technological uncertainty
  • Tried to overcome the scientific or technological uncertainty
  • Could not be easily worked out by a professional in the field.

The project may research or develop a new process, product or service or improve on an existing one. To apply, the company will need to put together a list of your projects with details of the R&D. This information will form part of the technical report for HMRC, and should include the number of projects being claimed for in the accounting period and their details.

Supporting details are crucial for claiming R&D Tax Relief, as they will help substantiate the claim and allow showcase a business’ scientific or technological achievements.

Since 8 August 2023, companies claiming tax credits through the R&D scheme must provide additional information to HMRC before submitting a Corporation Tax return. This includes details of:

  • The primary internal R&D contact who is responsible for the R&D claim (typically a company director)
  • Any agents involved in the R&D claim
  • The company’s Unique Taxpayer Reference
  • Employer PAYE reference number
  • VAT registration number
  • Business type – the current SIC (Standard Industrial Classification) code

Leyton is an international consulting firm that helps businesses leverage financial non-dilutive incentives to accelerate their growth and achieve long lasting performance.