If you were to ask someone working in the construction sector if they knew what R&D was, they’d probably say yes. However, if you pressed them to explain how someone in their industry might be taking advantage of research and development tax credits, there’s a good chance they’d struggle.
That’s because R&D is widely understood to be the exclusive preserve of Silicon Valley tech companies and scientists in lab coats, not construction companies. But this couldn’t be further from the truth: businesses across all industries, construction included, are able to claim on R&D.
Unfortunately, very few are doing so, and this is especially the case in construction: recent HMRC figures show that only 2% of the companies that made R&D claims in 2013/14 were within the construction sector.
Worse still, HMRC reports that less than 1% of UK companies eligible for R&D tax credits ever make a claim due to a lack of understanding and the sheer complexity of this area of tax, which means an enormous amount of potential tax relief is being lost.
So what might a successful claim in your line of work look like?
One company we recently worked with is a London-based restoration specialist. It instructed RD Tax Solutions to carry out an audit of potential R&D activity it had undertaken, which included designing bespoke fixings systems, improving lifting machinery and developing new software that allowed for real-time process management and quality control.
After carrying out a thorough investigation of its activity and finding it to be eligible, we identified qualifying costs in the region of £850,000. Following on from this, the company managed to successfully claim back more than £170,000 – approximately 20% of the initial investment.
Great news for this company, but had they left it much longer to make a claim, they could have been hard out of luck: R&D tax claims are restricted to the two previous tax years, so if you think you may be eligible then you need to act quickly.
Bear in mind, too, that most R&D tax specialists, including ourselves, operate on a ‘results-based’ basis, and only charge a fee once the tax benefit has been identified. This means that there is no risk and no up-front cost for construction firms so they have nothing to lose.
So go forth and innovate. R&D tax relief gives construction businesses the perfect incentive to develop, expand and evolve, and could well give your business an edge over the competition, which is what it’s all about.
Article by: Mark Tighe, Managing Director, RD Tax Solutions
