R&D tax credits in the construction industry – are you missing out?
Whilst many professionals involved in the construction and indeed the engineering industry have heard of Research and Development tax relief, there is often a misconception that it is not applicable to these sectors.
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. Rather, the relief is potentially available to every company in every industry.
However, the latest available figures from HMRC published on 14 September 2016 showed that out of 20,830 R&D claims across all sectors, construction claims amounted to only 480.
Is it the case then that UK construction and engineering is failing to invest money in innovation? This would seem unlikely given that our construction and engineering firms are considered amongst the best in the world, and also taking into account the constant struggle and uncertainty experienced within the sector as companies undertake more ambitious and challenging projects.
It seems that the common misconceptions which have been overcome in other industries are still lurking in the construction sector.
There are two R&D tax credit schemes, the SME scheme and the Large Company scheme, and both are relevant to the construction industry.
Just some of the types of products 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 exiting 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 and what is clear is that a sector as innovative as construction should be making many more R&D tax credit claims.
If you would like to discuss whether your company can benefit from an R&D tax claim contact James Greenhalgh, Tax Director at Cowgill Holloway, Chartered Accountants in Bolton, Manchester and Liverpool or visit our R&D microsite by clicking here. 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.
This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.
The information was correct at time of publishing but may now be out of date.