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Which Construction activities qualify for R&D Tax Credits?
With over 325,000 registered firms operating within the sector, the construction industry generates around £120bn, or 6% of GDP, to the UK economy according to House of Commons Briefing Paper – Dec 2019) and many of these companies regularly engage in R&D to resolve complex challenges in their day-to-day operations. Although the industry itself plays a big part in driving the economy forward, the uptake on the R&D Tax Credit scheme is very low and we would urge more companies in the sector to review their entitlement. The average amount claimed through the scheme by construction firms is currently £67,000.
HMRC statistics relating to Construction claims
2016-17
Number of claims: 2260
Amount claimed: £145m
Average Claim: £64,159
Accounts for 4% of total claims made
2017-18*
Number of claims: 2025
Amount claimed: £135m
Average Claim: £66,667
Accounts for 3% of total claims made
*Provisional figures as claims are still being submitted for this period
What type of activities qualify?
Examples of the types of activity which are likely to qualify for R&D Tax Credits within the construction sector include;
- Creating, trialling and experimenting with new/different materials
- Developing and implementing building management systems for maintenance and energy control
- Optimising designs and processes to reduce time and raw material usage
- Integrating environmental and renewable energy systems
- Developing new components and safety equipment
- Improving or adapting existing methods to seek appreciable improvements on efficiency, durability and sustainability
- Creating new engineering techniques to develop new products, materials and processes
- Overcoming technical challenges associated with regulatory and compliance requirements
- Implementing new energy saving technologies within buildings
- Solving complex challenges with unique site conditions and unusual build requirements
What types of expenditure can be included?
R&D Tax Relief can be predominately claimed on revenue expenditure in the following cost categories:
| An Illustration of benefit potential | £ | ||
| Staffing costs | 180,000 | ||
| Subcontractors | 25,000 | ||
| Externally Provided Workers | 12,000 | ||
| Consumables & Software | 38,000 | ||
| Energy | 15,000 | ||
| Estimated R&D Qualifying Expenditure | 270,000 | ||
| Enhanced R&D Expenditure (@ 130%) | 351,000 | ||
| Est. Tax Benefit Generated (@ 19% CT rate) | 66,690 | ||
