Many professionals involved in the construction industry have heard of R&D tax credits, but there is sometimes a misconception that it is not applicable to these sectors. Thankfully, this is not the case.
Table of Contents
- Can a construction company make a claim for R&D tax relief?
- What sort of construction projects qualify for an R&D claim?
- How much has the construction industry claimed in R&D tax relief?
- How can my construction company move forward with an R&D claim?
Can a construction company make a claim for R&D tax credit?
In reality, R&D activity goes far beyond that of IT companies creating new ground-breaking technology or the pharmaceutical industry employing increasingly complex science to produce new life saving drugs. The relief is potentially available to every company in every industry.
Construction and indeed engineering are full of challenges requiring inventive solutions. R&D activities usually relate to the innovative use of materials or overcoming problems on site. Often there are unique circumstances in which only a bespoke solution will meet stringent performance standards.
What sort of construction projects qualify for an R&D claim?
Just some of the types of projects which companies within the construction industry might undertake which potentially qualify for R&D tax relief are:
- Development or adaptation of tools to improve efficiency
- Identification of technological improvements to performance of products and processes
- Prototype design and commissioning, including quality testing and final building
- Innovative use of green or sustainable technology and methods
- Advancements in structural techniques to aid construction on unusual ground conditions
- Introduction of new or alternative materials to replace and improve existing components or materials
- Fabrication of components, integration and assembly of large systems that is technically challenging and not straightforward.
The above by no means demonstrates all the activities and products within the sector which may potentially qualify for R&D tax relief – what is clear is that a sector as innovative as construction is prime for this tax relief.
How much has the construction industry claimed in R&D tax relief?
The most recent statistics from HMRC show an almost fourfold increase in the amount construction businesses have claimed for tax relief on innovation-focused investment.
The amounts claimed have risen from £35m in 2014-15 to £135m for the latest reported period, which covers 2017-18.
The volume of construction industry R&D tax relief claims has doubled from 2% in 2014-15 to 4% of all claims being made.
There are two R&D tax credit schemes, the SME scheme and the Large Company scheme, and both are relevant to the construction industry.
How can my construction company move forward with an R&D claim?
If you would like to discuss whether your company can benefit from an R&D tax claim contact our specialist R&D team.
Having a specialist on your side ensures your claim includes the full extent of your qualifying activities and costs and it is essential to act quickly as R&D tax claims can go back two year-end periods only, although if activity is being undertaken, you can claim each year.