29 Jan 2020

R&D Tax Relief for the Construction Industry

Dave Schorah
R&D Tax Team Leader

HMRC Statistics show that just over 2000 businesses in the Construction Industry claimed in excess of £135 million in R&D Tax Relief in the 2017-18 financial year.

There are more than 330,000 Construction businesses in the UK – meaning those 2000+ businesses that have claimed, equate to only 0.6% of the UK Construction Industry.

The level of innovation in Construction is high due in part to the introduction of MMC (Modern Methods of Construction), the continuing development of new or improved materials, plant, processes and services, and the development of bespoke software for a wide array of applications. This makes many businesses in the sector eligible to make a claim.

The UK R&D Tax Credit schemes reward businesses for being innovative by reducing their Corporation Tax bill by up to 33p for every £1 spent on research and development activities.

Both large enterprises and SME’s can make a claim if the work that they’re undertaking seeks to achieve an advance in overall knowledge or capability in the field of science or technology and resolve scientific or technical uncertainty.

A benefit of the schemes is that R&D expenditure and activities are still eligible, even if the project(s) didn’t produce the desired end-results; this is due to the R&D still achieving an advancement of knowledge as it rules out a method.

Businesses can make a claim for the two previous financial years as well as the current year, resulting in a cash-injection that can be used to hire new staff, buy new equipment/plant or to re-invest into further R&D!

Many Construction businesses don’t realise that they qualify for the R&D Tax Credit schemes due to misconceptions surrounding what eligible R&D activities are. While the first thing that people think about when they hear ‘R&D’ is people in white lab coats, R&D is also engineering solutions which aim to resolve technical issues, on or off site.

Eligible R&D Activities

Although there are a huge array of specialisms within the Construction Industry, some examples of typical R&D activities undertaken are listed below:

  • The development of bespoke software systems or tools.
  • Modern Methods of Construction (MMC) e.g. off-site fabrication, modular construction, additive manufacture.
  • Development of new construction methodologies to reduce programme/improve safety.
  • Developing engineering solutions to unique/complex site or construction issues.
  • Development of/design with new or improved materials e.g. concrete, cement, glass, steel, tarmac, brick, insulation.
  • Development of improved products e.g. improved performance, quality, energy efficiency, fire safety.
  • Development of scanning and survey techniques.
  • Design of innovative temporary works solutions.

Eligible expenses include staff costs associated with R&D, materials consumed in trials and prototypes and for SMEs, costs associated with subcontracted R&D.

Businesses involved in Construction, that are also eligible to claim R&D Tax Credits, could be working in any sector or at various stages of the supply chain. For example:

  • Architecture
  • Civil Engineering
  • Housing Developers
  • Technical Consulting
  • Materials suppliers/experts
  • Plant and Machinery manufacturers or suppliers

Throughout our 8 years assisting businesses to claim R&D Tax Credits, we’ve identified eligible R&D activities in various areas of Construction and brought over £12 million in tax benefit to our clients over the last 12 months.

Our team of expert Consultants work with your team, at all levels, to fully understand your projects and to gather all the information they require to submit a robust and optimised claim to HMRC on your behalf.

We encourage all businesses to check their eligibility with an R&D Tax Specialist, and to ensure they’re claiming what they’re entitled to, if they qualify.

If you would like to discuss the possibility of your business claiming R&D Tax Credits, get in touch with one of our team today for a free consultation.

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