Energy – Empowering Chemical Companies: Ex…

For our very first guest blog, we’re delighted to be joined by Partnerships Manager Hector Simpson from our affiliate members Bonham and Brook, discussing how R&D tax relief opportunities can benefit businesses in our sector and the wider chemical supply chain.

The chemical industry is one of the most energy-intensive sectors, constantly striving for ways to improve efficiency, reduce costs, and minimize environmental impact. In the UK, tax relief schemes such as Research & Development (R&D) Tax Relief and energy efficiency initiatives like the Capital Allowances and the EII schemes provide valuable opportunities for chemical companies to innovate while optimising their energy use.

Maximising R&D Tax Relief in the Chemical Industry

R&D Tax Relief is one of the most impactful incentives available for businesses seeking to innovate. Often misunderstood as applying only to revolutionary new products, this scheme also covers advancements in energy efficiency. Chemical companies that improve processes, reduce waste, or adopt new ways to save energy can claim R&D relief. For example, optimising chemical reactions to use less energy or improving recycling methods to reduce waste and emissions could qualify as eligible R&D activities.

Through R&D Tax Relief, companies can claim back up to 33% of their R&D costs, including staff wages, materials, and utilities directly related to R&D activities. By taking advantage of this scheme, chemical companies can offset some of the financial burdens associated with energy-saving innovations, allowing them to reinvest savings into further research and development.

Capital Allowances

Capital Allowances provide further financial benefits by allowing companies to deduct the cost of certain energy-efficient assets from their taxable profits. These schemes apply to equipment purchases such as energy-saving boilers, lighting, and waste management systems.

By leveraging schemes such as the EII, CCL & CPS schemes, chemical companies are able to claim back costs on their energy expenditure in order to mitigate the rising energy costs across the UK. This not only lowers operational costs but also ensures compliance with increasing environmental regulations.

The Benefits of Leveraging Tax Relief for Energy Efficiency

For chemical companies, the combination of R&D Tax Relief and energy-related Capital Allowances offers a powerful route to improving both financial and environmental performance. By adopting energy-efficient processes and technologies, companies can cut energy costs, increase productivity, and reduce emissions—all while benefiting from significant tax relief.

In an era where sustainability and efficiency are critical for long-term success, chemical companies must explore these opportunities. Taking full advantage of R&D relief and energy-focused tax schemes can empower businesses to thrive in an increasingly competitive and environmentally-conscious marketplace.

The Supply Chain and Tax Schemes

By leveraging tax relief schemes like R&D Tax Relief, Capital Allowances, and Energy Relief, chemical companies can also enhance their supply chain resilience and efficiency. These schemes support investment in energy-saving technologies and innovative processes that can improve production reliability, reduce supply chain costs, and lower emissions throughout the entire value chain. For example, upgrading equipment or optimising processes to reduce energy consumption can lessen the dependency on fluctuating energy markets and mitigate supply disruptions. This helps chemical businesses not only meet sustainability goals but also build a stronger, more adaptable supply chain that aligns with global standards and customer expectations for greener practices.

By Hector Simpson, Partnerships Manager, Bonham and Brook