With its strong focus on better, more cost effective, secure and environmentally sustainable building methods, the UK construction industry is rife with innovation. Yet construction firms are missing out on millions of pounds in unclaimed Research and Development (R&D) tax relief.
An impressive 83 per cent of building, architecture and engineering firms have developed new products and services in the last two years, investing an average of £292,001, according to research by Catax, meaning they could be eligible for valuable R&D tax relief.
Yet only 39 per cent of firms in these sectors have ever made a claim, the same study shows.
So why are so many construction firms failing to claim?
Primarily because many of these businesses do not realise that much of what they are doing can be categorised as R&D making them eligible for tax relief under the government’s rules.
Secondly because many business leaders don’t know how to go about claiming R&D tax credits.
And thirdly because many business executives assume the process of claiming R&D tax relief will be expensive and time consuming.
Yet none of these concerns should be a barrier.
Rolled out after 2000, R&D tax relief is not just for scientists, it applies to a huge range of new products, services and systems. HMRC recognises that there is R&D in many fields.
The HMRC test for genuine R&D is whether it seeks to address a ‘scientific or technological uncertainty’. This can take the form of a new process, product or service, or simply be an improvement to an existing one.
Successful R&D tax relief claims have been made for work as varied as:
– Designing and installing steel casing around tall buildings to support scaffolding
– Designing, building and installing a completely unique internal ‘floating’ staircase with an integrated lighting system
– Assisting clients, contractors and design teams with developing new construction techniques and use of materials to suit their design aspiration’s as well as providing any testing and calculations required to satisfy current legislation
– Developing new and job-specific methods of installation and safe working procedures to comply with current health and safety regulations
– Researching and developing cleaning methodology for existing stone façades
– Ongoing development and implementation of 3D design software
– Creating solutions for building on ground that has not been used before, ie ‘virgin ground’.
Concerns over how to apply for R&D tax relief are not entirely unfounded since it can be a tricky process with complex rules that must be properly understood and adhered to.
The R&D tax credit claim is made up of a calculation of qualifying costs, such as the staff costs and materials you have used while carrying out the R&D project or work. There are strict tax rules about what does and does not qualify and without assistance from someone who properly understands the process it is easy to make mistakes.
This is why many companies appoint specialist tax consultants to advise them or make the claims for them.
But applying for R&D tax relief does not need to be costly or time consuming for company staff.
Most respected consultants will do the legwork on a contingent fee basis meaning there is no upfront cost to claiming.
We’ve helped construction firms claim back a total of £1.57million, with the average tax relief benefit standing at a hefty £105,000 per client, so it is a worthwhile exercise.
This money could make a huge difference if reinvested in a business to fuel further innovation and growth.
If all construction companies started claiming what they are entitled to it could really supercharge the whole sector.
Written by Mark Tighe, CEO of specialist tax consultancy Catax