R&D tax incentives for the Construction Industry
As the second largest contributing sector to the UK’s GDP, there is an immense opportunity within construction to claim R&D tax credits. Here, we explore why construction companies may be missing out.
Qualifying activities for R&D tax claims
Construction companies, far from lacking innovation, are carrying out research and development projects on an almost daily basis. The activities being undertaken, however, are quite often seen as ‘just part of the job’ rather than valid attempts to resolve technological uncertainties. New materials are developed, logistical challenges are overcome and safety processes are updated – all of which can be qualifying activities for an R&D tax relief claim.
Few construction companies have a dedicated research and development department with a specific budget, so such activities often get spread across departments and therefore overlooked as innovations. But provided the projects aim to achieve more than just commercial gain and represent developments that could benefit the entire sector, they are worth investigating for and R&D claim.
Barriers to making a R&D tax claim
As with many other companies, construction firms are put off by the often complex process of claiming. With multiple tasks to perform, administration work to complete and staff to pay, writing a report for HMRC is put at the bottom of the priority list for the accounts team. In addition, when R&D costs are spread over various departments, they can be difficult to spot. The amount spent on R&D is therefore often underestimated, meaning businesses feel there is little reward for the effort that goes into the claims process.
Another reason that construction firms may prefer not to claim is to avoid potentially lengthy liaison with HMRC if they decide to look into the claim further. Facing tax questions to which business owners may not know the answers is an unappealing prospect, so there can be a perception that it’s simpler not to claim at all.
Overcoming these tax claim barriers
Finding ways to overcome the perceived barriers to an R&D tax claim can prove hugely beneficial in the long run. Both SMEs and large companies can take advantage of the incentive, receiving either a cash sum, a corporation tax rebate or an enhanced expenditure to carry forward against future profits.
One way to make claiming R&D tax credits easier is to make changes to the way the business carries out its record keeping. Modifying the accounts process to enable better tracking of R&D expenses can make the claims process easier.
Another way to simplify the process is to employ the services of a specialist R&D tax advisor, who can determine whether a project is eligible, study the accounts to identify the qualifying costs, and assist with the claims process, ensuring the return is completed accurately.
The experts at R&D Tax Solutions can reduce the stress of claiming for R&D tax credits. With our specialist tax and accounting knowledge combined with extensive experience in research and development claims, we can help your business make a successful claim.