19TH NOVEMBER, 2019

Why Construction Companies Should Embrace R&D Tax Credits

Recent HMRC data shows that only around 1% of SMEs in the UK construction sector are taking advantage of the government’s R&D Tax Credits scheme. This is a real missed opportunity, with many thousands of pounds going unclaimed; money that many construction companies can ill-afford to lose. That’s why we’re actively encouraging the industry to learn more about R&D Tax Credits so the scheme can be used to its full potential.

R&D Tax Credits are designed to boost the money companies spend on R&D activities, leading to more investment in growth and innovation. Just last month HMRC released its yearly R&D Tax Credit statistics, which show that more SMEs are claiming than ever – which is great. However, so many companies are still missing out, and although total claims are up, average claim values are down.

Background

Although it’s fantastic that so many businesses across a huge variety of sectors are benefitting from the incentive, we’ve often asked ourselves why SMEs are making such small claims overall. Perhaps they are unclear about what they can claim for or are nervous about the application process itself. They could be hearing the wrong information on the grapevine or been bitten by an HMRC enquiry in the past.

Undoubtedly construction is one of the main industries failing to make full use of R&D Tax Credits and what’s on offer. Construction is an incredibly diverse sector by its very nature, representing some 7% of the UK’s GDP. R&D projects can be very large and costly, so we’re not talking small change here.

Construction firms are missing out

Despite the fact that there are over a quarter of a million construction SMEs across the UK, HMRC figures show that less than 2000 of them have made use of the R&D tax relief available. Even when considering the substantial number of sole traders in the industry, we’d expect more eligible companies to be claiming. In our experience, we’ve found that construction companies may not be claiming because they see their R&D as simply everyday work, not as innovative projects that qualify.

Typically, if a construction business is investing in the resolution of problems on site, or is looking to achieve something more quickly, safely, efficiently or cheaply than ever before, then it’s likely to be eligible. Indeed the funding itself is highly value, with claim amounts from construction SMEs being worth around £50,000 on average.

How can you know if when a project is R&D?

If you’re not sure whether your project counts as R&D, ask yourself: has it addressed any complex technological or scientific problems? If the answer is yes, then R&D has very likely taken place, particularly if you’ve needed to find a unique solution. It’s not always easy to spot what kinds of things can be claimed for however, which is why it’s so important to speak to R&D Tax Credits experts such as ourselves. We can worth with you to help you realise the full benefit your investment deserves, and can guide you through the application process from start to finish. Don’t forget, even very ordinary, everyday projects can qualify for R&D Tax Credits. Essentially, if your company has developed new products or processes - or improved building processes, techniques or materials - then a successful R&D tax relief claim is well within reach.

At Tax Cloud, we see R&D crop up in all types of construction firms. Whether they are concerned with civil, structural or electrical engineering, supplying materials, building houses or working in construction manufacturing, there’s always plenty of opportunity for an R&D tax relief claim.

It’s not about reinventing the wheel

R&D doesn’t always mean big, bold developments the like of which have never been seen before. Take for example a scenario where a company is asked to provide the electrical and mechanical services for a facility that’s carrying out specific medical research. It would be essential that the facility remained in full operation while the new systems were installed, meaning an interim HVAC system would need to be used temporarily. It’s easy to think of this type of technical challenge as an everyday simple activity, but for the research facility it has a very profound impact. This is just one example of many where construction companies will overcome problems onsite.

Expanding your business

The most successful claims for R&D Tax Credits deliver both strong methodology (that stands up to close HMRC examination) and maximised benefit. There’s a lot of uncertainty around, so it pays to seek specialist advice in making sure all your eligible costs are included. R&D Tax Credits experts like us can help you identify all the areas that qualify - including the ones you’d never think of - and make the application process as painless as possible.

Solving the construction problems of the future

If you’re still not quite convinced, think about how a cash injection - such as that offered by R&D Tax Credits - could benefit your business growth plans. It’s a reliable cash flow source, and will likely foster a robust culture of R&D within the company. The money could help you overcome challenges such as sourcing new or better materials or supply chain complexity, or enable you to recruit more highly skilled technicians.

R&D Tax Credits can also have a cumulative year-on-year effect. It can trigger a positive cycle of innovation where the R&D tax relief is used in offsetting further R&D costs in future. For instance, you could run an apprenticeship scheme to train up future generations of technicians, thus proliferating STEM skills. It’s a popular scheme that can be the key to banishing productivity issues to the history books.

Get in touch with the R&D experts

If your company is within the construction industry and relevant R&D has recently taken place then don’t miss out! See what you could claim today using the Tax Cloud calculator developed by Myriad Associates. With separate arms for both accountants and businesses, it helps you to see what a glance what you could be entitled to.

Take a look at the portal today, use our contact form or call us on 0207 118 6045 to ask any questions and discuss your options. Our experienced accountants and specialists will be very pleased to assist.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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Myriad Associates helps businesses maximise tax reliefs and secure R&D grant funds. We specialise in R&D Tax Credits, Video Games Tax Relief, Innovate UK grants, Horizons 2020 grants, and Research and Development Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • 100% success rate
  • Over £100m claimed and counting
  • Industry leading specialists
  • In-house technical, costing and tax experts
  • Member of the Research and Development Consultative (RDCC) committee

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
David Farbey David Farbey MA, FISTC, FRSA Technical Consultancy Director
Deborah Chapple Deborah Chapple ATT Corporate Tax Director
Lauren Olson Lauren Olson MA, MISTC Senior Technical Consultant