How R&D Tax Credits Could Save Construction Companies Money
Only a small amount of SMEs in the UK construction sector are taking full advantage of HMRC’s R&D Tax Credits scheme. Recent HMRC data has shown that thousands of pounds are going unclaimed, and it's money that would be extremely valuable to SMEs in construction. That’s why Myriad Associates is urging companies in the industry to reach out to see if they could be eligible for R&D tax relief.
What are R&D Tax Credits?
The R&D tax credit scheme was conceived with innovation in mind; offering relief to companies engaging in R&D activities encourages investment in growth and innovation. Essentially, HMRC will pay back up to 33.35% of your R&D expenditure, either as a reduction in Corporation Tax or as a cash credit. Any company in any industry could be eligible and the type of project is broadly defined. But many companies are still underclaiming, or worse, not claiming their entitled R&D credits at all.
Still, there is some good news. The annual R&D Tax Credit statistics show that more SMEs are claiming every year, taking advantage of both the SME scheme and increasingly, the RDEC scheme which applies to SMEs in specific cases. Enterprises in construction should read on to ensure they are not missing out on one of the UK government’s top incentives.
Construction and R&D Tax Credits
Nearly 300,000 companies are connected to the construction industry, but only around 1% of those have made a claim. We’d expect more companies to have claimed, even considering the high numbers of sole traders. The construction industry is incredibly diverse and a hotbed for innovation, representing 9% of the UK’s GDP. R&D projects are often large and costly, therefore researching your eligibility could save you no small sum.
In our experience, we have found the reason many construction companies are missing out is because of their unfamiliarity with the eligibility standards of the scheme, seeing their R&D projects as routine, everyday work and not as qualifying innovation.
Generally, construction companies can identify qualifying activity if they are investing in the resolution of scientific/technological problems, or looking to achieve something more cheaply, safely, quickly, or efficiently. Average SME claims in the construction industry are worth around £57,000.
Knowing if your project is eligible for R&D Tax Relief
It can be tricky working out exactly what will qualify, however, all companies have to do is prove their innovative project is making an advancement or appreciable improvement in science or technology, as deemed by a competent professional. If you’re unsure, ask yourself: has the project addressed any complex technological or scientific problems? If yes, then you’ve likely completed some R&D, especially if your solution was unique. Even ordinary projects can qualify; developing a new process, technique or material is enough to put R&D tax relief within reach. At Tax Cloud, we have seen eligible projects in all types of construction. Civil, structural, and electrical engineering all have had successful claims, as have materials and manufacturing projects.
Still, it’s not always easy spotting which projects and which costs will be eligible, which is why speaking to a specialist R&D tax credit expert could save you time and confusion. We can work through your project to identify the full benefit you deserve and then help you through the application from beginning to end.
It doesn’t have to be rocket science
Sometimes R&D is less about reinventing the wheel and more about perfecting it. It doesn’t need to be big, bold, and life-changing; for example, a company being asked to provide the electrical and mechanical services for a facility that is carrying out medical research. The facility must stay on and fully operational during the installation of the new systems, meaning the construction company had to develop an interim HVAC system. This is just one example of companies overcoming problems onsite.
Maximising your claim and expanding your business
The best R&D claims come from companies that can demonstrate strong methodology (which holds up against scrutiny from HMRC) and a clear understanding of eligible expenditure. It pays to seek expert advice for this, as crucial elements can often slip through the net with an untrained eye. Specialists like us can help identify costs or even entire projects which you might not have thought of, then carry through the claim until the end.
A cash injection, such as the one offered by the R&D Tax Credits scheme, can hugely benefit your business growth. It’s a strong source of cash flow and encourages similar innovation in the future, knowing that a culture of R&D can pay off. The money can be used in sourcing new materials and processes or in recruiting more highly skilled technicians, which can all help to foster a cycle of innovation. R&D Tax Credits could also be used in offsetting future R&D costs, making sure your company’s innovation doesn’t stagnate.
What do I do now?
If you think your company may have engaged in R&D activities and want some expert guidance on how to move forward, get in touch. Using our Tax Cloud calculator, developed by Myriad Associates, you can get an estimate on how much you could be entitled to.
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